Australia third most expensive location in APAC for data centre development

At $9,630,000 per megawatt, Australia remains the third most expensive location in the APAC region for data centre development as nearly $25 billion is needed to build out the existing pipeline.

Approximately US $116 billion (AU$183.2B) will be needed to build out the existing colocation data centre pipeline across Asia Pacific in the coming five to seven years as demand for the sector grows, according to calculations by Cushman & Wakefield.

Cushman & Wakefield’s H2 2024 Asia Pacific Data Centre Market Update report shows the pipeline of colocation projects in the region either currently under construction or in late-stage planning stands at 12,452 megawatts (MW).

At a city level, Tokyo has the strongest pipeline within Asia Pacific at 1,656 MW, followed by Mumbai (1,143 MW), Johor (1,049 MW), Sydney (783 MW), and Beijing (613 MW). In these key cities, gross yield on cost increases to 14 per cent.

Using the construction cost of a mid-specification data centre for each market as a benchmark, the total capital required to build out the pipeline currently sits at US $116.2 billion (AU$183.6B).

By Cushman & Wakefield estimates, this development pipeline provides an opportunity to generate over $14.9 billion (AU$23.54B) in annual colocation rent and can potentially achieve almost 13 per cent yield-on-cost ratio for developers.

Alex Moffat, Cushman & Wakefield’s Director, Alternatives Capital Markets and Australia Lead – Asia Pacific Data Centre Advisory Team said “Whilst power availability continues to top the list of challenges throughout APAC, Australia is well placed from a renewable energy generation perspective.

“Melbourne and Perth particularly are well placed for both generation and transmission. Sydney is experiencing increased delays in major infrastructure upgrades which are limiting development options before 2029.

“With the potential introduction of data sovereignty laws, Australia is well placed for regional AI workloads. Compliance with data regulations introduced by respective governments will make location one of the key selection criteria for data centre expansion strategies across all operators.

“At $9,630,000 per megawatt, Australia remains the third most expensive location in the APAC region for data centre development. High construction costs and inflation are being experienced across most infrastructure projects in Australia currently.

“Our forecasts indicate that Australia’s data centre development pipeline is the fourth largest in APAC at 1,610MW which equates to USD$15.5BN of capital required by 2030. By comparison, the Tokyo market itself has a data centre development pipeline of 1,656MW by 2030.”

Capital Requirements by market (ranked by capital requirement)