Why the development of data centres is an asset class worth paying attention to
This week Anthropic signed its first deal in Australia for a $31.9 billion data centre, which is proposed to be constructed at the Western Downs Digital Park near Dalby. This facility will have an ultimate peak capacity of 2.16GW, which at full development is the average electricity use of about 1.5 million Australian homes.
RenewMap is now tracking 11 Queensland data centre projects in development, construction or commissioning.
What development considerations does the RenewMap pose?
The proposed Western Downs project alone could add around 25% to Queensland’s current daily electricity consumption if fully developed. The proposed site is next to major generation and transmission infrastructure and would connect directly to the grid. Water is another issue. The Western Downs project proposes an air-cooled system with relatively low operational water use, but water use by data centres is now attracting regulatory attention.
Government is responding to these issues, with National Cabinet agreeing last month that large data centres have material energy, water and land-use impacts and that nationally consistent mandatory standards should be introduced. Queensland has taken a slightly different approach, with recently enacted State strategic project regime expressly excluding data centres from that new approval pathway.
For developers and investors, these issues add another layer of complexity to what is already a highly infrastructure-dependent asset class. Access to suitable land, sufficient and reliable power, grid connection, water, planning and approvals, community expectations and construction capacity will all need to be considered early in the development process.
What are the key takeaways?
While there is an enormous investment and development opportunity for these assets, getting new projects underway is going to be difficult. They face all the usual hurdles of access to land, with added complexity of significant power and water requirements that brings with it community engagement and regulatory oversight, together with a currently challenging construction market.
Early consideration of the property, planning, infrastructure and regulatory issues will be critical to getting these projects away. For developers, investors and other project stakeholders, this will be an important part of assessing opportunities in the sector.
McCullough Robertson works across property, planning, infrastructure and regulatory issues that arise in major developments and can assist clients considering data centre opportunities to navigate these issues from the outset.