Sydney Leads APAC in Data Center Growth with Major Investment Boom

Sydney is the fastest-growing city in the Asia Pacific (APAC) region in terms of megawatt growth. In the first half of 2024 alone, Sydney added an impressive 177 MW in operational capacity, contributing significantly to a regional supply increase of 1.3 GW, bringing the total to 11.6 GW. The city’s rapid expansion is driven by multifaceted factors, including rising data generation, increasing storage needs, and the widespread adoption of advanced technologies such as artificial intelligence (AI) and cloud computing.

Robust Expansion Driven by Technology and Government Policies

Rising Data Generation and Storage Needs

Sydney’s growth in the data center sector is underpinned by the exponential increase in data generation and the corresponding need for storage solutions. As businesses and consumers continue to generate vast amounts of data, the demand for secure, efficient, and scalable storage solutions has never been higher. This demand has driven the city to rapidly expand its data center infrastructure to meet these growing needs. The proliferation of connected devices, smart technologies, and the Internet of Things (IoT) are among the key contributors to this surge in data volume. With data becoming a valuable asset for businesses, ensuring its secure storage and accessibility has become a top priority.

The adoption of advanced technologies like AI and cloud computing further fuels this growth. AI, in particular, requires significant computational power and data storage capabilities, driving the expansion of data centers to support its implementation. Cloud computing, which allows for flexible and scalable data storage, has become a cornerstone for many businesses, necessitating the development of robust data center infrastructure. Together, these technologies not only increase the demand for data centers but also drive innovation within the sector, pushing providers to offer more advanced and efficient solutions.

Government Focus on Critical Technologies

According to Alex Moffatt from Cushman & Wakefield, Sydney has solidified its position as the primary data center hub in Australia, hosting over 65% of the nation’s IT capacity and development pipeline. This growth is expected to continue, fueled by the Federal Government’s emphasis on AI as a critical technology for the future. The government projects a 19% annual growth rate in AI adoption through 2030, highlighting its importance for the country’s technological and economic advancement. This focus on AI not only underscores the need for advanced data centers capable of handling the associated data and computational demands but also positions Sydney as a key player in the global technological landscape.

The government’s support extends beyond merely acknowledging the importance of AI. Policies and regulations are being tailored to encourage the development and deployment of AI technologies, fostering an environment conducive to innovation and growth. Investment incentives, research and development grants, and regulatory frameworks that support the integration of AI into various industries all contribute to the rapid expansion of the data center market. This comprehensive approach ensures that Sydney remains at the forefront of technological advancement, underpinning its growth in the APAC region.

Sustainability and Investment: The New Standard

Emerging Importance of Sustainability

With the rapid growth of data centers, sustainability and energy efficiency have emerged as critical issues for the sector in Australia. The Federal Government has implemented stringent regulations, mandating that data centers hosting federal agency workloads achieve a five-star NABERS rating. This requirement sets a new industry standard for environmental performance, pushing data centers to adopt more sustainable practices. These regulations reflect a broader trend towards integrating sustainability into technological and industrial development. As data centers are significant consumers of energy, their environmental impact cannot be overlooked. By setting high standards for energy efficiency, the government aims to mitigate this impact and promote sustainable growth.

The push for sustainability is not solely driven by regulatory requirements. There is also a growing awareness within the industry of the long-term benefits of sustainable practices. Energy-efficient data centers are not only better for the environment but also offer cost savings in the long run. Reduced energy consumption and more efficient cooling systems translate to lower operational costs, making sustainability both an ethical and economically sound choice. This shift towards sustainable practices is a key factor in the ongoing evolution of the data center market, with Sydney setting a precedent for other cities in the region.

Increasing Investment and Demand

The investable universe for data centers in Australia is expected to nearly double in the coming years. CBRE forecasts an increase from AU $23 billion to AU $40 billion by 2028, indicating a robust investment climate. Sass Jalili from CBRE emphasized the exponential demand for data centers in Australia, driven by both global and local operators increasing their activities. This uptick in investment is a testament to the confidence in the sector’s growth potential and the expanding digital economy. The influx of capital is expected to drive further development and innovation, propelling Sydney’s data center market to new heights.

The demand for land dedicated to data centers is also on the rise, competing with space traditionally used for industrial and logistics purposes. The average size of land acquisitions for data centers has grown considerably, from 1.3 hectares in 2018 to 15.7 hectares in 2024. This growth not only reflects the increasing scale and capacity of data centers but also highlights the strategic importance of location in the sector. Proximity to key infrastructure, energy sources, and end-users are critical considerations in site selection. As data centers continue to expand, the competition for prime real estate is likely to intensify, further driving the market dynamics in Sydney and beyond.

Competitive Landscape in APAC

It was underscored the significant expansion of Sydney’s data center market, now the fastest-growing in the Asia Pacific (APAC) region in terms of megawatt growth. Just in the first half of 2024, Sydney added an impressive 177 MW to its operational capacity, marking a substantial regional supply boost of 1.3 GW and elevating the total to 11.6 GW. This rapid growth is driven by multiple factors. Increasing data generation from both individuals and businesses creates higher demand for storage and infrastructure. Moreover, the adoption of cutting-edge technologies like artificial intelligence (AI) and cloud computing has surged. Companies are moving more operations online, requiring robust data center support. Australia’s secure political environment and favorable climate for high-tech investments also attract global firms. This convergence of factors propels Sydney’s data center market to new heights, reinforcing its position as a critical hub in the region’s digital economy.

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