Data centre market doubling in four years is conservative: CBRE
Australia’s burgeoning data centre market is set to nearly double to $40 billion over the next four years as companies invest big in AI platforms, according to a new CBRE report.
But even that forecast could be higher if power-supply constraints did not cap the sector that burst into prominence last month following the sale of AirTrunk to Blackstone in a deal valuing the operator at $23.5 billion, CBRE data centre research head Sass Jalili said.
“I would say the forecasts on data centre growth is on the conservative side,” Ms Jalili said.
“I wouldn’t be surprised if we actually see it go above what’s forecasted over the next five years, just given the rate of use for AI.”
It is a concern shared by others. Last month Charter Hall chief executive David Harrison said Australia’s energy shortfall was as severe as its housing crisis, and a lack of reliable supply would be a big hurdle to ramping up investment in data centres.
The industry’s energy requirements are much larger than many appreciate, according to Morgan Stanley, which estimates power demand from generative AI will increase at an annual average rate of 70 per cent through to 2027, mostly from the growth of data centres.
The investment bank said power providers probably needed to develop renewable energy and storage projects to meet this demand.
The bullish forecast for local data centres was due to strong tailwinds such as domestic AI revenue being set to double in five years to almost $5.5 billion with about half of business expected to adopt the technology in some capacity,CBRE said.
The volume of data created and consumed globally was also expected to rise exponentially. In 2023, about 120 zettabytes of data – a zettabyte equates to 1 trillion gigabytes – of data was created or consumed globally. By 2025, that figure is expected to increase by 25 per cent to more than 180 zettabytes due to the growth of data-hungry AI platforms.
Ms Jalili also said the uptake of new technology had accelerated, citing that while it took about 50 years for electricity use to be widespread, the adoption cycle for the latest technology was only days long.
“Adoption cycles have only continued to shorten, with Twitter taking two years to reach 1 million followers, while the newer ChatGPT only needed five days to get that volume of user base,” she said.
Where the next data centres will be built
That appetite has meant the pipeline for data centres is already set to be even larger than double. In total, the current data centre supply is almost 1500 gigawatts, but there have already been another 5350 gigawatts of new data centres announced by operators, though the timeline for when these will be built is unclear due to the power constraints.
But given most of Australia’s data centres have been built in NSW so far, leaving it with limited power supply, that has meant other states such as Victoria and Western Australia are set to be winners as data centre operators increasingly look elsewhere where there is more power.
NSW’s pipeline is still the largest, with 3274 megawatts of capacity set to be added to its existing capacity of 811 megawatts.
This is followed by Victoria with 1807 megawatts in announced data centres, which is a significant increase from its current capacity of 332 megawatts. Western Australia’s data centre capacity, meanwhile, is set to almost triple to 156 megawatts of capacity.
“Melbourne’s data centre market is expected to grow the fastest as the city is becoming more attractive for providers owing largely to land availability and land pricing.”
