Australia’s data centre market is anticipated to double in size in the next 5 years. With its stable economy, transparent regulatory framework and high quality infrastructure, Australia is a relatively safe location for data centre investment from a legal and regulatory perspective.
To explore settings in other jurisdictions visit our APAC Regulatory Guide.
Sources: ABS, Statista, CBRE, Cushman & Wakefield
There is significant demand for on-shore data centre capacity (particularly from government and financial services tenants, and increasingly hyperscalers) as a mature developed economy.
However, the allure of the Australian market is marked by insufficient carrots and burdensome sticks. Australia’s strict foreign investment regulations can significantly extend the timeline for site acquisition for foreign investors and developers, as well as the timelines for foreign hyperscale tenants to commence a tenancy in the site. Power supply continues to be a concern. Critical infrastructure regulations and government security requirements increase the regulatory burden.
There are also limited incentives offered by government to encourage investment. Despite these impeding factors, a remarkable data centre growth story is emerging.
Spotlight on key drivers
Stable economy with a clear regulatory landscape
Australia boasts a stable economy with a transparent regulatory framework, providing clarity and certainty for data centre development.
With laws that clearly outline the relevant procedures for power and land approvals, developers and investors can navigate the permitting process and management of data centres with confidence.
Although these requirements can prove burdensome and impose delays, they ultimately bring clarity that fosters trust among investors and positions Australia as a reliable hub for data centres in the APAC region.
Power supply constraints
Australia’s data centre development faces the spectre of power supply constraints hindering growth.
The impending shutdown of major coal power stations, combined with network areas already at capacity and the skyrocketing energy demands of new data centres, threaten to create a shortfall in supply. This also presents challenges for connecting large new electricity loads.
Addressing these constraints, especially when transitioning to renewable energy, will be crucial for supporting the growth of data centres in Australia.
Limited incentives and significant foreign investment restrictions
In comparison to other countries, the Australian Government offers significantly fewer incentives and benefits to data centre developers.
Foreign investors must navigate complex regulations which can complicate and delay projects. Chief among these is the requirement for approval from the Foreign Investment Review Board (FIRB) for land acquisitions and data centre operations and the significant operational constraints imposed by the Security of Critical Infrastructure Act 2018 (SOCI Act) and the Federal Government’s Hosting Certification Framework (HCF).
It is crucial for developers to carefully assess the FIRB, SOCI Act and HCF implications before committing to data centre projects in Australia.
'In the past 5 years Australia has dramatically evolved into a top destination for digital infrastructure. We've seen investments surge, driven by major players.'
KWM Partner Cheng Lim
Download the Australia chapter below
Unlocking opportunities and navigating challenges
