Big Tech Needs Big Infrastructure Plans

The rise of cloud computing, big data, artificial intelligence (AI), and the Internet of Things (IoT) brings new challenges. It has now placed the spotlight firmly on data centres as a critical component of Australia's infrastructure. The Australian data centre market is experiencing unprecedented sector growth. And it's being driven by surging demand, government incentives, and technological advancements.

In this article we will explore the current state of play. Breaking down all you need to know about this critical sector and the future challenges it faces.

Understanding Data Centres

In our previous article, 'Emerging segments and the planning challenges they pose' we explained the role of data centres. They are the physical infrastructure that allows our modern tech-based society to function. Housing the servers and networking equipment to enable digital data processing and storage. Unlike traditional commercial properties, data centres have certain unique and non-negotiable requirements. Such as high-capacity electricity, robust cooling systems and proximity to major telecommunications infrastructure. They are often categorised by megawatt power capacity and location (e.g. edge data centres). Or by tolerance and redundancy (in Tiers I-IV), rather than in square metres of floor space.

Space Hungry: Powerful Growth Drivers

Australian data centres have been subject to surging demand. This includes both physical capacity and virtual storage/processing capabilities. According to advisory firm Mordor Intelligence, Australia currently has a data centre output capacity of around 2.18 gigawatts.¹ This will almost double to 4.07 GW by 2030, reflecting a compound annual growth rate of over 13%.² Currently, operational and technological improvements are in play. But these won't necessarily result in doubling the physical floorspace to deliver this new capacity. There will be a need for a sizeable quantum of new data centre space.

Multiple factors are driving demand:

• ‍Cloud Adoption & digital transformation: Businesses across Australia are transitioning to cloud platforms. Increasing the need for local data processing and storage facilities. Global giants like Amazon Web Services (AWS), Microsoft and Google have ramped up investments to meet this demand.
• ‍Artificial Intelligence: AI requires powerful hardware. As well as scalable infrastructure to process vast amounts of data for machine learning and analytics. As AI expands into areas like autonomous systems and real-time processing, data centre demand will also rise.
• 5G & Internet of Things (IoT) growth: The rollout of 5G networks has accelerated IoT adoption. Resulting in real-time data processing. Edge data centres brings data processing closer to users to reduce latency (which increases processing speed). They are becoming more critical in regional and metropolitan areas alike. Innovations like driverless cars and high-quality video-streaming are dependent on edge data centres.
• ‍Government policy: Data centres are considered as critical national infrastructure. They are a cornerstone of economic growth thats necessary to deliver Australia’s Digital Economy Strategy 2030. Australian privacy laws and data sovereignty concerns also encourage local data hosting. The Federal Government has committed significant capital to fund technological innovation, broadband and cyber security. Which are all dependant on adequate data centre capacity.

A Supply Crunch Looms

Facilitating so much new supply will be a major challenge. But one that needs tackling to support this critical sector. Some of the impediments are:

• ‍Limited suitable sites: Finding land with the necessary power, cooling and connectivity infrastructure to host data centres is hard. Locations near fibre optic networks and reliable power sources is key. Metropolitan hubs or industrial zones, are highly sought after. Meaning that data centres are competing with other much needed uses like logistics hubs for land. To combat this,  more mixed-use sites need developing to co-locate facilities.
• ‍Rising construction costs: The cost of building data centres has increased markedly. Although common to all real estate sectors, inflation, supply chain constraints and labour shortages play a part. High upfront capital requirements make it a challenging sector for smaller developers. Its niche requirements also deters some large investors. This is due to the need for specialist development and operational skills.‍
• Energy usage: Data centres are energy-intensive. Accessing sufficient electricity capacity is a critical constraint. In some areas, outdated grid infrastructure hampers development timelines and scalability. Data centre power demand is constant. Unlike other users such as households or businesses who’s power needs spike at certain times. This places extra demands on the power grid and can lead to community resistance. And given Australia’s power grid is coal dependent, it makes it harder to align with Australia's commitment to reduce carbon emissions by 43% by 2030.

Conclusion: Trade-Offs Will Be Necessary

The Australian data centre market is a dynamic and rapidly evolving real estate sector. It will be critical infrastructure across Australia technology landscape. So it is imperative to meet its rising needs to ensure national resilience and economic growth. But given the challenges around site availability, construction costs and energy usage, it will entail trade-offs.

Developers, investor, policymakers and local communities will need to compromise to harness the benefits of data centres. That is easier said than done. But open communication and public education on the importance of this sector is key. Planning flexibility to protect urban land areas for this critical infrastructure will help to resolve this issue.

Reference

1. Mordor Intelligence, 2025. “Australia Data Center Market Size & Share Analysis - Growth Trends & Forecasts Up To 2030”. Accessible from: https://www.mordorintelligence.com/industry-reports/australia-data-center-market