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Tokyo, Singapore, Seoul and Sydney are driving investor demand in Asia Pacific.
Darcy Frawley, CBRE’s Pacific director for data centre capital markets, said data centre consumption from cloud operators and AI firms had driven the growth. “Occupiers are now competing aggressively to increase their data centre footprint to accommodate future business needs,” he said.
“Australia specifically is set to see a large gap between capacity and demand in the medium term, which will lead to significant rental growth and make the sector even more appealing for data centre investors.”
Occupiers are now competing aggressively to increase their data centre footprint to accommodate future business needs
CBRE director Darcey Frawley
Data centres have proven to be an attractive investment opportunity for larger institutional and offshore investment groups, with the average investment size over the last ten years sitting at $94.5 million, unlike many other alternative asset classes.
Macquarie Data Centres, part of the ASX-listed Macquarie Technology Group, has started construction on its $350 million IC3 Super West data centre with construction company FDC as the main building contractor.
IC3 Super West is being purpose-built for high-density cloud and AI workloads, including hybrid air and liquid cooling options.
Render of the Macquarie Data Centre’s IC3 Super West project in Macquarie Park, Sydney.
David Hirst, group executive of Macquarie Data Centres, said it is the third and largest addition to the provider’s flagship Macquarie Park Data Centre Campus in Sydney’s North Zone, and will bring the total campus IT load up to 63 megawatts.
“Sovereign AI and cloud data centres are the backbone of Australia’s AI-driven future. Like all of Macquarie Data Centres’ facilities, IC3 Super West will be Certified Strategic by the Australian Federal Government,” Hirst said.
“This gives our data centres a strong compliance posture as regulations around data sovereignty and AI continue to tighten in Australia and worldwide.”
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In the past 10 years, transactions of the assets have been limited, reaching a peak of $3 billion in 2020, with an average investment of about $1.2 billion per year. During the first five months of 2024, a range of offerings has been transacted, amounting to $414.5 million.
Historically, the majority of investment has been concentrated in NSW, primarily in metropolitan areas, followed by Melbourne.
Ray White head of research Vanessa Rader said before the pandemic, yields for data centre assets ranged from 7 to 9.5 per cent. However, during the period of low interest rates, yields compressed to as low as 4.3 per cent.
Recent sales have seen yields rumoured to be as low as 3.6 per cent and as high as the upper 6 per cent range, varying based on factors such as size, location and functionality.
“As Australia’s population grows and its dependence on technology increases, the country’s demand for data is expected to rise,” Rader said.
“While foreign investors have been active in this asset class for some time, Australia is emerging as one of the key global locations for new facilities, following countries like the United States, Germany, United Kingdom and China.”
The growing demand from the listed sector is expected to put pressure on yields and drive the development of new supply.
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