Sydney leads the way with new data centres

THE Asia Pacific data centre market saw a 1.3GW boost in capacity over the first six months of 2024, with Sydney leading with the greatest increase in MW capacity.

According to Cushman & Wakefield’s latest Asia Pacific Data Centre Update for H1 2024, the region has increased its current operational capacity of 11.6GW.

Sydney was the fastest growing market in the Asia Pacific, recording the greatest increase in MW capacity, adding 177MW in operational capacity in H1.

While by percentage, Malaysia saw the greatest increase in operational capacity up 80% from H2 2023.

“Malaysia’s recent growth is the result of a culmination of factors including spillover from Singapore, developer speed to market and the country’s ‘ready for service’ infrastructure,” said Vivek Dahiya, head of the Asia Pacific data centre advisory team at Cushman & Wakefield.

“Cost is also a major factor. Malaysia’s central bank rate is competitive and this, combined with a relatively affordable cost of entry and government incentives for the sector, make it an appealing location for customers from hyperscalers through new entrants to the sector.”

Globally, the edge data centre market is set to surpass the US$310 billion market by 2026, with the demand for major digital infrastructure grows exponentially, driven by the Internet Of Things and Generative AI.

The Asia Pacific region’s six largest markets accounted for circa 85% of operational capacity over the period.

With the development pipeline now comprising 4.2GW of under construction activity and 12.0GW currently in the planning stage, reflecting an increase of 2.8GW in development activity since end-H2 2023.

In Australia, Sydney accounts for more than 65% of operational IT capacity and pipeline.

With Goodman Group recently announcing it was increasing focus on the  data centres sector, with a growing pipeline that could have an end value of up to $100 billion.

“In the first half of 2024 alone, the market expanded by over 177MW, making it the fastest-growing data centre market in the entire APAC region,” said Alex Moffat, Australia lead of the Asia Pacific data centre advisory team at Cushman & Wakefield.

“With the Federal Government designating AI as a critical technology of national interest, we’re seeing its adoption rate in Australia projected to grow by around 19% annually through 2030. This growth will naturally drive further expansion in the data centre sector.”

The report also found Sydney is the most mature data centre market in the region, based on a combination of variables including size, vacancy rate, operator presence and individual asset level build capacities.

With Sydney boasting a scoring higher than the tight markets of Beijing and Tokyo in terms of its larger building capacity for individual data centres.

“Sustainability is quickly becoming a defining issue for Australian data centres,” added Moffat.

“The Federal Government is tightening energy efficiency regulations, and any centre hosting federal agency workloads will need to achieve a five-star NABERS rating, setting a new industry standard for environmental performance.”

Recent activity in Australia’s data centre market has seen Blackstone acquire AirTrunk for $24 billion, in record takeover deal for the region reflecting the ongoing demand for data centre assets. Prior to that Centuria Capital Group bought a 50% interest in provider ResetData capitalising on demand for data storage which is rising by at least 30% every year.

While CBRE’s Q1 Asia Pacific Data Centre Trends report found new Australian data centre supply is now fully contracted, due largely to rapid cloud adoption and AI demand.

Infratel’s investment in CDC Data Centres this month announced a valuation uplift of $466 million over the last three months.

While April, NextDC launched a $1.32 billion raising to develop and boost facilities in Sydney and Melbourne. With Macquarie Data Centres is set to to acquire land and buildings from Keppel DC REIT in a $174 million deal.

With SKS Technologies and property developer/contractor Built were recently awarded a $90 million plus international hyperscale data centre in Melbourne.

Most recently, NEXTDC announced it was undertaking a $550 million capital raising to further its expansion into Asia, including new data centre development sites.