Australian data centre market world’s second hottest despite stock falls

Australia has become the second hottest data centre investment market in the world, with the industry projected to reach $US4 trillion in value by 2030, according to a new report.

Knight Frank expects the global data centre will reach $US4 trillion in value over the next five years.

Australia has become the second hottest data centre investment market in the world, with the global industry projected to reach $US4 trillion ($6.7 trillion) in value by 2030.

The bullish outlook comes despite the derating of data centre stocks on the back of concerns about the slower pace of leasing in new complexes by companies ranging from Microsoft to Amazon around the world.

This has sparked fears about the demand for space in large-scale facilities, including locally, but analysts have said the tech ­giants are simply choosing the ­facilities they commit to more carefully, with Meta, Google and Oracle still active.

Much of the focus has been Asia, which in 2024 saw $US15.5bn worth of capital investment, $US6.7bn of which was poured into growth opportunities in Australia. The only nation to receive more investment was the US, which received $US14.6bn, according to a report from Knight Frank.

The firm’s Global Data Centres Report expects the market to compound at an annual growth rate of 18 per cent over the next five years to reach $US4 trillion by 2030.

Knight Frank’s global head of data centres, Stephen Beard, said the industry was about to undergo “rapid transformation” as ­hyperscalers and co-location providers flocked to markets that offered access to power and a “favourable regulatory environment”. Mr Beard said: “As global capital races to capture the next wave of digital infrastructure growth, the competition for prime development sites, particularly in power-constrained locations, will intensify.

“Real estate investors and ­developers are positioning themselves to capitalise on this demand, with an emphasis on acquiring strategically located land and securing long-term power agreements.”

Power to supply data centres was one of the most crucial factors for markets, and several developers had shifted their focus to “renewable energy adoption and energy-efficient design”, he said.

Australia was well placed to capitalise on that growth, given its vast amounts of land.

Knight Frank found that Melbourne was primed for growth as the key data centre market locally, with more power available than Sydney. The Victorian capital is expected to see a slate of ultra-high-density data centres on the city’s edge, many of which will be used to power AI workloads, according to KPMG.

Melbourne is rising up to challenge Sydney as Australia’s new data centre capital.

That finding was in line with an M3 Property report released in October that found that 75 per cent of all new projects at the time were in the Victorian capital.

Data centre capacity in the Asia-Pacific is expected to increase by 4174 megawatts, up 32 per cent, by 2027.

Knight Frank found there were more than $US58.7bn worth of planned investments over the next two years.

Tokyo is predicted to see 25 per cent capacity growth – about 295 megawatts worth – over the same period, with $US4.1bn worth of investment. The Japanese market was attractive due to its location, stable power infrastructure and the growth of cloud services in the region, the report found.

Malaysia’s Johor was also well-placed for expansion, with 85 per cent capacity growth expected over the next two years.

Johor will be the home to a new 270-megawatt AirTrunk data centre which was announced earlier this year. The second data centre brings AirTrunk’s total investment in the region to $3.5bn.

Nearby in Thailand, its capital Bangkok has also been touted as a new Tier 1 growth hub given its lower power and land costs.

Google had last year committed to spending $US1bn on data centres in Bangkok between 2025 and 2029.

Local data centre player NextDC has also had its eye on the region for sometime, with plans to build its own data centre on the outskirts of Bangkok.

India’s Mumbai had seen heavy investment from AWS which had invested in co-location data centres.

Originally published as Australian data centre market world’s second hottest despite stock falls