2024 has shaped up to be an extremely busy year for the Sydney market with all the announcements and activity going on in various clusters. While Western Sydney (Huntingwood/Eastern Creek) is still the most active, it does feel that every corner of Sydney has seen some form of activity in the last 6-8 months. The analysts tracking this closely is DC Byte and W.Media caught up with analyst Sarvaesh Mohan to gain his insight on the latest developments for the Sydney data centre market.
“From Goodman announcing a project along Kent Road, to Global Switch lodging applications to expand its campus, NextDC acquiring its S6 facility, AirTrunk’s expansion of SYD2 in Lane Cove, Macquarie Data Centres breaking ground on its IC3SW, ongoing works at Equinix’s SY9x in
Rosehill, CDC’s Marsden Park announcement, and various others in the West – it has been a whirlwind of activity and I’m expecting more in the coming months,” Mohan told W.Media.
At the end of 2023 DC Byte reflected the Sydney market as having a total IT capacity of 2.5GW,and that number is now 3.6GW. “In the span of 8 months there has been an almost 50% increasein the market size which is absurd,” said Mohan.
With Sydney being touted as an AI hub, in a way it’s not surprising to see these huge announcements – Mohan teased the the market will be seeing a couple more soon – as many prepare for the AI wave. He said this has already led to a shift in the announced sizes of various projects across Sydney. “It was not too long ago that 100MW was seen as impressive, now it’s the norm with several operators announcing hundreds of MWs at one go,” he said.
As demand is still expected to outpace supply, the concern for Sydney is power [1]. “Western Sydney in particular is going to face power constraints and it will be interesting to see how operators meet this challenge,” agreed Mohan. “While players like Equinix are signing PPAs to get renewable energy from wind farms, it will take time to develop the infrastructure for renewable projects and transition from non-renewables.”
“Sydney is still well positioned to capitalise on this AI wave but more needs to be done to address these concerns especially with a general slowness around nuclear energy,” he added. “We might also see new entrants to the Sydney market soon as it continues to grow and I think the biggest challenge for Sydney is to effectively leverage technology and expertise to deploy these huge chunks of capacity sustainably.”
Go west
Western and Northern Sydney are becoming the focal points for development – although the West is still the preference – with West Sydney accounting for 70% of the total IT capacity of Sydney (~2.5GW out of the total 3.6GW), according to Mohan. “Eastern Sydney will see small pockets of activity here and there but cost wise it’s still cheaper to build out in the West and I think that will still remain the case despite concerns around rising costs in the West as well,” he added.
“With players like Fujitsu and Global Switch looking to sell their assets, I would not be surprised if we see a couple more transactions though I would caveat that both of these have been on the market for some time now,” he said.
Hyperscalers and the rise of AI
The hyperscalers, which drive the market, are generally adopting hybrid strategies so a mix of colocation and self-builds – apart from Google which Mohan said is so far just colocation and build-to-suit. “In Sydney the most obvious one is AWS with several self-builds in Smeaton Grange but they also have taken colocation capacity and there are build-to-suits as well,” he said. “With AI, I
think this mixed bag will continue with cloud demand and AI demand complementing each other
rather than competing with each other.”
Mohan believes that, hypothetically, the hyperscalers could use larger portions of their self-builds for AI workloads and colocation facilities for cloud workloads. However, there will also be AI workloads in colo facilities and cloud workloads in the self-builds.
“Retrofitting DCs for AI use is quite difficult so I think a good way to see it is that the newer announcements are in part expecting the AI wave and are already preparing for it by implementing cooling solutions and other measures to support AI workloads,” he said. “Cloud is still dominating but I foresee somewhat of a 50/50 split between the two in years to come.”
“With AWS and Microsoft also announcing further investments into the Australian market back in 2023 and AWS having that agreement with the Australian government for the Top Secret Cloud, I would expect future developments to lean more towards AI – but cloud workloads will still remain a critical component for these hyperscalers”, said Mohan.
[1] https://w.media/sydneys-data-centres-may-be-constrained-by-power-challenges/
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AUTHOR: Simon Dux
