Data Centre Demand Driving Up Industrial Land Prices

The demand for data centres, sparked by the global pandemic, is driving up industrial land prices in select Australian locations.

Video conferencing, online schooling, entertainment and remote work has all fuelled the demand, which is being particularly keenly felt in western Sydney.

In 2020, data centre groups acquired about 55ha of land for hyperscale-cloud sites, according to the latest report by CBRE.

Data centre net absorption doubled in past year with Asia Pacific Tier 1 markets including Tokyo, Sydney, Singapore and Hong Kong reaching 321.6 megawatts (MW), CBRE Industrial & Logistics regional director Cameron Grier said.

“Data centre demand is pushing industrial land prices up across the country, for instance, the market rate for benched and serviced land in Eastern Creek and Erskine Park is anywhere from $1000-$1200 per square metre, which is above market price of about $750-$850,” Grier said.

“Data centre groups have been very active in Sydney and Melbourne during the past year and are now even focusing their attentions on other markets including South Australia and Western Australia.”

Currently, the total capacity of Sydney is 444MW, with 499MW to be added by 2024.

This is led by data centre operator NEXTDC, who is expected to launch its S3 project in Sydney, adding 80MW capacity to the market this year, and DCI Data Centres’ SYD02 adding 36MW next year.

DCI, owned by Brookfield Asset Management, obtained approval for its $400-million project at Eastern Creek in January this year.

DCI chief executive Officer Malcolm Roe said the facility would set industry-leading benchmarks for water and energy efficiency in the region.

“The team were delighted to have secured this approval, which will be a crucial part of our three-stage strategy for this key site,” Roe said.

“We are also excited to be leading the industry in delivering new cooling technologies to significantly enhance our power utilisation effectiveness and minimising our impact on the environment.”

Airtrunk has also submitted plans for 16 data halls, valued at $472 million, at Blacktown.

Sydney is home to two-thirds of Australia’s data centre supply, which has been described as the “new oil” of the 21st century by the reserve bank's Philip Lowe.

Grier said business continuity planning had prompted the rapid uptake of cloud adoption to support remote working.

“The Covid-19 pandemic has accelerated digital transformation across such areas as e- learning, online shopping, content streaming and entertainment,” he said.

“Looking further ahead, the wider adoption of 5G and further digitalisation of healthcare among other government services will be the primary demand drivers of data centre growth.”

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