Australia poised for $155b data centre boom as AI investment reshapes property markets

“At the moment, we’re seeing the amount of capital flowing to invest in data companies [worldwide] at US$750 billion, which is extraordinary,” she said. “Some say that could be over $US1 trillion next year.

“It’s certainly impacting markets all around, with a return of more than 20 per cent per annum. For Australia that’s a great opportunity to do something significant with the investment coming here.”

The investment being made in Australia’s data centres – the second-largest destination after the US – has previously been estimated by a Westpac IQ report at more than $155 billion. That could represent a net GDP boost of around $75 billion, with a spillover of even more, and bringing a total of 400,000 jobs.

“Australia has many advantages,” Stewart told the meeting of industry heavyweights. “We have significant advantages in Australia in terms of land, renewables and security, and while power and grid connections are constraints on growth, it’s not putting people off.

“What is important is consistency, consistency and consistency in terms of government policy and taking the historic view.”

Regional communities set to benefit from next wave of development

The size of the investment could also bring enormous benefits to regional Australia as data centres move further and further away from city centres, largely due to community backlash against centres in local neighbourhoods, seen both here and in the US.

“Over the last 15 or so years, land was certainly more available than it is now,” Tim Robinson, senior director, real estate, APAC, Equinix, told the summit. “But there’s been a big shift in terms of land-led shortages, and it’s becoming more challenging from a power perspective, and you’re having to do a lot more due diligence.

“The cost of land is now a huge consideration for us, and we’ll see centres gravitate outwards over time, away from the city fringe.”

A good example is IREN’s $10 billion, 800-megawatt data centre currently under construction in Bundey, South Australia, two hours outside Adelaide. It is being built using existing local electricity substations, transmission lines, and regional renewable energy.

“It’s quite a large project by Australian standards – not as big as projects in Texas or Oklahoma or Canada – but we are seeing people being very supportive of what we are doing,” said Boris Dangubic, vice president commercial of IREN.

“They can understand the benefits, and our interactions with the South Australian government have been very good, and we’ve had great support for our strategy. They’ve seen the opportunity for jobs being created, the positive economic benefits and the tax revenue.”

As a result, IREN plans to build more projects in country South Australia and is also in talks with other state governments.

AI demand driving larger and more complex facilities

Another difficulty, however, is the time it takes to construct data centres. Meg Redwin, executive director, general counsel global, Multiplex, said they are incredibly complex operations that demand flexible and innovative approaches.

“They’re being constantly adapted, taking a story off, or putting one on, or changing the cooling systems, or switching to recyclable water,” she said. “It’s quite a dynamic area.”

It can also be a challenge to ensure they’re a 30-year asset that will remain fit for purpose throughout their whole lifecycle, said David Hirst, chief executive, Macquarie Data Centres, especially at a time when microchips are changing every quarter.

“In the future, the chips will be more hungry for energy, but they’ll also be more efficient over time,” he said. “We’re now seeing much larger data centres being built because of the growth opportunities of the digital economy.”

One important consideration in locating the centres is the preference to have two within 25 kilometres of each other in case one goes down. Macquarie, for instance, has a new 200-megawatt $3 billion centre planned for Macquarie Park, Sydney.

“But the computers you put in are worth five times that figure, so that’s $15 billion’s worth of computer equipment on site,” he said. “That’s a big capital requirement.”

Australia’s regions stand to share in the AI dividend

The regions may be even more welcoming to data centres when they also offer many benefits to local economies. Equinix, for example, has also invested in a $3 billion wind farm 60 kilometres north-west of Geelong in Victoria to help fuel its data centres.

“That’s becoming more common than it was previously,” Robinson said. “There’s now a lot more transparency around reporting links to renewables, and we’re committed to being 100 per cent renewable by 2030.”

While the majority of the AI computing capacity produced by data centres in Australia will be exported overseas in the future, the benefits to nearby towns will continue to accrue.

Dangubic cited his Bundey project as a landmark. “That’s a $10 billion infrastructure project near a town with 250 people,” he said. “That’ll be rates and tax revenue for the region as well as opportunities to upskill local employees.