Description
Australia’s data centre colocation market continues to be centered around the Sydney and Melbourne markets as the US-based hyperscale clouds have expanded aggressively and consistently over the last two years on the heels of accelerating cloud and AI adoption. While Australia is considered a mature data centre market, hyperscale demand is expected to accelerate meaningfully on the back of AI infrastructure deployments. There are some fears of an oversupply situation emerging, given the sheer pace of development and land banking. Our analysis points to demand across Melbourne and Sydney continuing to remain strong over the next five years. Public cloud and AI adoption has shown no signs of slowing down, supported by proactive government digital transformation and outsourcing initiatives on both a national and local level. Australia is also increasingly viewed as a safe haven for AI workloads in the APAC region based on its close ties with the US, which has become more prevalent as the overhang of GPU export restrictions have impacted several markets in the South East Asia region.
The competitive landscape dynamics in the Sydney and Melbourne markets are not as intense compared to other tier 1 markets in APAC such as Singapore, Hong Kong, Sydney, Seoul and Mumbai. Part of the reason is due to Australia’s geographically isolated location from the rest of the APAC region. Many have underestimated Australia’s ability to be a magnet for sustained cloud and AI infrastructure growth given its location within the APAC region and a somewhat one-dimensional demand profile as China-based clouds are not expanding as aggressively in Australia due to the geopolitical climate has also moderated entry into the market. This coupled with emerging self-build activity from the hyperscalers removes a certain level of colocation demand from the market. That being said, it has always been our thesis that self-building on the contrary actually solidifies the demand profile of a market as the hyperscalers see a long enough runway and growth upside to invest in their own sites, and this typically goes in tandem large waves of leasing demand as hyperscalers are typically much slower and efficient at bringing data centre capacity online compared to third party platforms and developers.
Both Sydney and Melbourne have a small set of third-party platforms relative to other tier 1 markets, and the big three – NEXTDC, AirTrunk and CDC have essentially dominated both markets with their ability to build fast, at scale and delivering hyperscale grade capacity in the right availability zone locations. Many regional and global platforms have underprioritized the Australia market over the years due its perceived lack of growth upside that stems from its geographical isolation from the rest of the APAC region. There are already confirmed AI deployments landing in both Sydney and Melbourne and the AI infrastructure wave is also expected to be a major tailwind for the Australia market demand similar to the first wave of public cloud.
Despite the various moving parts, the market continues to grow and develop, and colocation demand is not expected to tail off. The Sydney data centre colocation market, now standing at 887MW of built out capacity, is projected to be worth US$2.1b in 2025 with a five-year CAGR of 20% through 2030. The Melbourne data centre colocation market, now standing at 452MW of built out capacity, is about half the size of Sydney and is projected to be worth $1.1b in 2025 with a five-year CAGR of 30% through 2030. As with most markets in the APAC region, hyperscale colocation growth is projected to outpace enterprise colocation growth.
The DCAI report series (DCAI: Data Centre, Cloud, AI and Interconnection) provides comprehensive and granular tracking of data centre, hyperscale cloud and interconnection markets around the world. The data at the foundation of these reports is built on asset-level tracking and on-site visits of all the major sites in a given market. On top of this, the hyperscale component of supply and absorption is clearly identified, tracked, and projected, while build pipelines are clearly laid out. Hyperscale availability zones, self-builds, and cloud on-ramp locations are mapped out and provide an additional layer to the analysis of data centre clusters.
This report is the definitive resource for any data centre operator, investor or end user (service provider, enterprise or hyperscale) that is looking to understand or project the third-party data centre colocation and self-build market in the two major Australian metros of Sydney and Melbourne.
