Australia in box seat to capitalise on data centre growth

Strong growth in AI workloads opens up a raft of business opportunities that could spread across most capital cities across the country.

The Asia-Pacific region leads global data centre investment, capturing US$15.5 billion in 2024 and demonstrating its growing strategic importance, according to new data from Knight Frank.

Australia was the leading investment location behind the United States, with capital investment worth $6.7 billion last year.

The market is set to continue to grow, driven by the rapid uptake in AI workloads and digital transformation efforts.

Speaking to Dominic Storey, operations manager at Acclario he says he isn’t shocked by these numbers.

“The projected investment figures, particularly in Australia are impressive, but honestly not surprising considering the uptake of AI and the ever-increasing importance of performance and data sovereignty,” he said.

The AI chip advantage

Australia also holds a strategic advantage in the AI race, as one of only four nations in the region with an exemption on export restrictions on AI chips and is attracting increased investment for data centre growth, Knight Frank noted.

However, addressing varied regulatory frameworks and adapting to US export controls on AI chips remain essential factors in maximising the opportunities.

“Having access to the market-leading chipset in AI is definitely a leg up for Australia. … Without the chipset, I believe you’d see those investment growth costs and timelines increase a fair bit,” said Storey.

As data centre growth is fuelled by the computational intensity of AI workloads, cloud services providers are also expanding their infrastructure to meet the digital transformation demands, according to Michael Vincetic, leader, cloud and core enterprise/zCloud, Kyndryl Australia and New Zealand.

“Two factors contributing to this trend are the widespread shift towards hybrid IT environments and growing importance of data localisation requirements,” said Vincetic.

However, while cloud migration continues to be a major driver, many organisations will continue to run critical workloads on premises due to complexity or compliance concerns.

As a result, businesses are not only investing in cloud solutions but also re-thinking their on-prem strategies to help ensure they can deliver consistent, scalable, and secure services across both.

The data centre infrastructure is the foundation, whether it’s traditional workloads in a private data centre or modern apps running in the cloud.

“It needs to be scalable, resilient, and interconnected,” he said.

Data centre growth will be a boon for other local industries

As AI workloads require significantly more power, it’s pushing rack densities from 30-40kW to over 80kW. This in turn is driving a major shift towards ultra-high-density deployments that’s redefining the city’s data centre landscape.

Sites that provide energy efficient design, strategic locations and long-term power agreements will be in high demand, according to Knight Frank.

“Hyperscaler and colocation providers [are] prioritising markets that offer access to power, robust connectivity and a favourable regulatory environment,” said Stephen Beard, global head of data centres, Knight Frank.

Traditionally viewed as a secondary market to Sydney, Melbourne is rising as a key data centre hub as power availability becomes increasingly difficult and land scarcity intensifies in Sydney. Perth is also expected to gain more interest in the coming years, with the momentum in the data centres sector expected to flow through to every Australian capital city, according to Knight Frank.

“The key competitive edge Australia has is how much land we have. I may be biased, but I would love to see expansion and partnership with Brisbane as well,” said Storey.

With international as well as domestic investors eyeing the local market, local industries stand to benefit. There will also be a push for improved data centre development approvals, power distribution upgrades and demand for allied industries to support the infrastructure growth.

“There are the obvious technology and IT service companies with the capabilities to assist with networking, data management and cybersecurity. There’s also real estate and construction and energy technologies and sustainability will also have a significant part to play,” said Storey.

Government will also have an important role to play in facilitating investment and support the development of new data centre sites.

“The government can help by streamlining approval processes around building and environmental regulations, provide funding, grants or tax breaks to investors in the AI space, collaborate with energy providers to upgrade power grids and be part of a larger national strategy to grow the infrastructure for AI,” he said.