The AI surge: 175 new data centres and $26b in investment

Services linked to AI will become a major contributor to the economy, creating a swath of jobs from data scientists and business analysts to natural language specialists and software developers. That in turn will generate demand for an extra 483,000 square metres of office space, according to report author Ronak Bhimjiani, a JLL director and real estate economist.

The JLL report – drawing on previous analysis by Mandala Partners – notes that Australia’s data centre deployable capacity will more than double from 1350 MW in 2024 to 3100 MW by 2030, a growth surge that will require an estimated investment of $26 billion.

“Using a medium data centre power capacity scenario, we can estimate approximately 175 data centres, while under a small data scenario, the number is 350,” Bhimjiani said.

Huge amounts of capital, much of it from offshore, are being directed into the fast-growing sector locally. This month Swiss private equity giant Partners Group paid $1.2 billion to acquire GreenSquare DC, the latest Australian data centre operator to attract a hefty cheque from international investors.

ASX-listed logistics giant Goodman is devoting more of its pipeline to data centres globally, while local start-up AirTrunk was bought out for $24 billion, the biggest corporate deal in Australia last year.

Prashant Murthy, chief financial and commercial officer at AirTrunk agreed that use of AI, especially at the big tech companies which are AirTrunk’s customers, is accelerating data centre growth, both here and abroad.

Major investors now regard data centres as essential digital infrastructure critical to economic growth and underpinning every industry, Murthy told The Australian Financial Review

“Data centres are increasingly being seen by investors as an asset class of their own, crossing infrastructure, real estate and technology in particular,” he said.

“Broader data, cloud and AI tailwinds are advancing investor interest across the full capital spectrum.”

There are also challenges to achieving that growth forecast, including crucially the supply of clean energy, he said.

“To attract AI investment to Australia, speed to build at scale is key and digital infrastructure growth must be enabled, starting now through renewable energy infrastructure developments, workforce skills development and streamlined planning and approvals for new data centre builds,” Murthy said.

“Digitalisation and the energy transition are complementary. The long-term demand from digital infrastructure can underpin investment in renewable energy as well as energy storage solutions.”

The JLL report canvasses a range of demand drivers for Australian real estate: from the rise in international student numbers to the boost in advanced manufacturing and the additional retail floor space – between 2 million square metres and 2.5 million square metres – needed over the next five years to match population growth.

Healthcare real estate, an emerging asset class, will also benefit. Spending on health is projected to increase from 10 per cent of GDP in 2022-23 to 13.1 per cent by 2060-61 as the proportion of people over 65 rises substantially.