AI Surge Fuels $46b Data Centre Investment Boom in Australia by 2029

AI is fuelling a data centre investment boom in Australia: what real estate and construction teams need to know

Australia is now a top-tier data centre market. CBRE forecasts investment to grow by about 50% over the next four years, reaching $46 billion by 2029 based on committed projects. The drivers are clear: AI adoption, hyperscale cloud expansion, and corporate upgrades from legacy facilities.

Data centres have shifted from niche infrastructure to a core real estate play. Investors are leaning into greenfield developments, strategic acquisitions, and build-to-suit projects, often through partnerships and joint ventures to secure power-ready sites. As Sass Jalili of CBRE puts it, Australia combines rising AI-led demand, resilient pricing, and a competitive cost base.

Who's driving demand: hyperscalers and "neocloud" tenants

Hyperscalers such as Apple, Google, and Meta continue to expand, requiring large-scale, high-capacity campuses. AirTrunk is a headline example, operating SYD1, SYD2, SYD3 in Sydney and MEL1 in Melbourne; the company was acquired by Blackstone and CPP Investments in a $24 billion deal last September.

Alongside hyperscalers, "neocloud" customers-AI-focused, digital-first firms like OpenAI and Zoom-prefer renting large blocks in shared facilities over building their own. This has pushed colocation to record levels: 53% take-up in Australia last year, up from 18% in 2021. NextDC's national footprint spans seven centres in Sydney, four in Melbourne, and two each in Brisbane and Perth, aligning with this shift.

Supply, power, and pricing pressures

The supply pipeline is heavily pre-committed and equipment lead times are stretching, which is pushing rental rates higher. Vacancy is around 12%, creating immediate pricing pressure. Lease sizes are getting larger with longer terms, as tenants secure future capacity upfront.

On current trajectories, the country's 2025 capacity sits at 1.4 GW, likely reaching 1.8 GW by 2028. Demand is set to outrun supply, with a shortfall of 0.7-1.7 GW by 2028, according to CBRE. As Darcy Frawley of CBRE notes, institutional capital inflows are accelerating, and confidence is set to build over the decade.

Why Australia is winning site decisions

Tech operators weigh costs, access to power and water, regulatory conditions, talent, tariffs, and geopolitics. Australia's secure energy grid, clear rules, and stable political environment score well on that checklist. For a deeper look at the data and assumptions, see CBRE's Why Australia for Data Centres.

Action plan for developers, investors, and builders

• Lead with power: Prioritise sites near high-voltage substations and proven grid upgrade pathways. Secure early capacity reservations and engage utilities on substation timelines and transformer availability.
• Structure scale-ready leases: Expect 10-20 year terms, larger initial blocks, and expansion options. Bake in CPI or fixed escalations and cross-connect revenue where applicable.
• Pre-commit ahead of construction: Lock in anchor tenants to de-risk financing. Use staged builds with modular MEP to meet near-term loads and scale fast.
• Design for high-density AI loads: Plan for 30-60 kW per rack and liquid cooling readiness. Factor in switchgear, generators, and chiller lead times early; these are current bottlenecks.
• De-risk approvals: Target zones with clear pathways for data centres. Address noise, traffic, water use, and community engagement upfront to cut delay risk.
• Plan the energy mix: Pair grid capacity with renewable PPAs and on-site options where feasible. Track water availability and consider closed-loop or hybrid cooling to meet ESG commitments.
• Use partnerships to move faster: JV with landowners, utilities, and specialized operators to secure power-ready sites and accelerate delivery.
• Budget for escalation: Materials and equipment inflation, longer lead times, and FX exposure on imported gear should be priced into contingencies.

Where the momentum is strongest

Sydney and Melbourne are now core Asia-Pacific hubs, drawing both domestic and offshore capital seeking attractive risk-adjusted returns. Brisbane and Perth are gaining attention as network resilience and latency considerations grow, with operators like NextDC and AirTrunk already active across multiple cities.

What to watch over the next 24-36 months

• Rental rate pressure: Low vacancy and pre-committed pipelines point to continued increases for colo pricing.
• Power constraints: Grid connection timing will make or break delivery schedules; expect competition for transformers and switchgear.
• Longer, larger deals: Hyperscalers and enterprises are locking in capacity earlier and for longer durations.
• Policy tailwinds: There is growing industry support for faster approvals and renewable-backed builds. As Scott Farquhar put it, "We should export megawatts as megabytes - and get paid megabucks."

Bottom line

Australia's data centre market is entering a multi-year build cycle. The winners will control power-ready land, compress delivery timelines, and pre-commit scale tenants. Move early on grid, procurement, and permits-and design for high-density AI from day one.

For a strategic overview of demand drivers and capital trends, review CBRE's latest analysis. If your teams need to get fluent in AI use cases shaping tenant requirements, explore role-based training at Complete AI Training.