Data centre investors, developers and operators: a race to opportunity
Data centres are critical components of Australia's digital infrastructure, serving as the backbone for the economy's growing reliance on AI, cloud computing and digital services.
The demand for secure, reliable and scalable data storage and compute workload solutions has surged. Morgan Stanley estimates suggest that capacity in Australia could more than double by 2030 to around 3,100 megawatts.
This growth is being driven by hyperscale customers, governments and large enterprises. Crucially, data centres are no longer merely locations for the storage of data and private and public cloud-based application services. They are also becoming the 'AI factories' of the future, hosting compute workload for AI training processes and for AI inference.
In addition, increasingly stringent rules governing the sovereignty and security of data and critical infrastructure necessitate local Australian-based data centres to ensure the sovereign protection of sensitive operational information and workloads. The expansion of high-quality local data centre capacity is therefore essential to meet the escalating demands of Australia's digital economy.
Australia is also uniquely positioned in the Asia-Pacific region to become the powerhouse of data centre capacity. It has abundant land and the ability to generate cheap renewable energy. In the words of Australia's Chief Scientist, Dr. Tony Haymet, Australia should use its advantage in renewable energy generation to 'use electrons for our own server farms and then export the photons'. Australia has a very real opportunity to be a net exporter of AI tokens by becoming the pre-dominant regional location for data centres hosting AI workload.
Investors and data centre operators describe the current status of data centre development as a race in the Asia-Pacific region, and also a race between states. Data centre investors, developers and operators need to navigate a number of critical legal areas to be successful in this race. This Report is designed to cover those key areas.
Key takeaways
The increase in total required electricity will need to be matched by a corresponding increase in electricity generation (most likely renewable as the push for decarbonisation continues).
Some jurisdictions are more attractive or easier to navigate than others for data centre development.
Data centres should remain alert to the potential for sustainability and human rights impacts in their operations and supply chains, and have in place appropriate risk mitigation and management systems.
The Asia Pacific data centre market is poised to overtake North America as the world's largest by the end of 2025.
'Data Sovereignty' has become a critical theme in data centre transactions over the past 18 months, driven by heightened national security concerns and regulatory focus.
Data centre investments may span a range of investment mandates depending on the structure of the transaction and the characterisation of the revenue profile and risks inherent in the chosen structure.