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Melbourne’s data centre growth outstrips Sydney (despite its size)




“The fastest growing Edge metro in the world”

Australia’s largest data centre [DC] operator Equinix has declared Melbourne the fastest growing edge metro in the world at a 45% CAGR to reach 102 Tbps by 2026, up from 35 Tbps in 2023. Tbps represents a measure of interconnection bandwidth used in the company’s latest Global Interconnection Index 2024. 

While the Sydney DC market is on a different scale – the largest metro in the Asia-Pacific region for professional services, consumer services and industrial services interconnection bandwidth, and the second largest for telecom and cloud and IT services bandwidth and already at 485 Tbps interconnection last year – Equinix Australia managing director Guy Danskine believes Melbourne’s time has come. “After AWS’s arrival…Melbourne now has its own full [big four] cloud market,” he said, adding that Equinix saw early on that customers don’t want to be transferring their traffic in and out of Sydney to access carriers or cloud providers. 

The hyperscale cloud providers have expanded aggressively in the city over the last two years as cloud adoption accelerates, and Danskine said Equinix is currently the only AWS partner that can offer Direct Connect up to 100G in Melbourne, which is proving attractive to customers wanting to boost connectivity. 

As a result, the DC operator is seeing some different customer profiles compared to Sydney. “[There’s] a lot of research and development going on…very strong universities and we’re seeing that manifest in some exciting health tech organisations,” said Danskine. “Quantum computing is certainly emerging as a strength for Melbourne and financial services – there’s so many of the banks based there.” As a result, he said, “it does bring some really interesting industries forward in terms of who’s looking to connect to each other in Melbourne.”

Equinix has its adjacent ME1 and ME2 IBX data centres in the Port Melbourne area and the latter DC connects to its ME4 site in Derrimut, about 19km away. Danskine said ME4 provides good physical redundancy for customers. Its ME5 DC is in the city. He revealed that ME2’s expansion is already underway, with news about that development coming later this year. “We’re continuing to invest tens of millions of dollars and expanding that market,” he said. 


Comparing Australia’s two biggest markets

Sydney is a much bigger DC market than Melbourne with colo spend of US$1.53bn versus US$684m according to Structure Research. With 54 operational DCs, a further three in development and a 12 DC land bank, it is an order of magnitude higher than Melbourne’s 32 DCs, a further two in development and a 5 DC land bank.

However, Structure’s data shows Melbourne outstripping Sydney’s market growth (18% vs 16% 5-year CAGR to 2028). This will see Melbourne grow from US$684m to US$1.47bn by 2028.

According to Structure Research’s “Australia (Sydney & Melbourne) DCI Report 2023”, the city has a slight edge on price of power per kWh (8-13 cents versus Sydney’s 9-14 cents) meaning Melbourne hits an average per density of 5.9 kW/rack versus Sydney’s 5.6 kW/rack. Average colo pricing is similar in both cities from enterprise to retail, although Sydney shades Melbourne on hyperscale pricing. 

“The Melbourne colocation market now stands at 218MW of currently built out capacity in 2023 with 84MW of data centre capacity currently under development and over 190MW of capacity classified as land banks given the campus style data centre build configurations that is becoming more prevalent across the northern and western Melbourne sub regions,” said Structure Research’s head of research Jabez Tan. 

While central Melbourne including the Port area holds most data centres, western Melbourne is seeing growth in Deer Park/Derrimut and Truganina, while Tullamarine in the north is also a place that will be on the expansion agenda of DC operators. In the east, the city has six DCs but these are dispersed. 

DCByte’s latest tracking figures show Melbourne sitting on 205.5MW of live DC capacity but interestingly, there is a further 499MW of committed capacity meaning it has the required elements (government, land, power, and so on) secured, or it will be developed by an operator with a strong and reliable track record. Adding that to 71MW under construction and a further 216MW at “early stage” development – which may not holding all of the approvals or funding as yet – and Melbourne’s DC capacity is heading towards 991.5MW.

Hyperscalers are self-building almost immediately in Melbourne, in contrast to the colo-first approach they adopted in Sydney said DCByte research analyst Teresa Tan. She pointed to CDC’s imminent 150MW arrival in Brooklyn, West Melbourne, as a sign that government demand is also growing. “Port Melbourne area is also strategically quite near one of the emerging West DC clusters, providing good connectivity options,” she said.

According to DCByte, Sydney represents about 60-65% of the total Australian DC market with Melbourne around 20-25%. Despite the difference in size, Tan said the demand profiles of the cities are fairly similar, particularly in the scale of enterprises seeking DC services. She pointed to Next DC’s M2 (60MW-to-100MW), M3 (150MW) and soon M4 (80W), Stack’s 72MW campus in Truganina and AirTrunk’s up-to-120MW facilities as examples of how similar Melbourne is developing to Sydney at the top-end capacity-wise.


Melbourne’s population will be bigger

“Although Sydney long holds the crown, we’re seeing strong potential down in Melbourne,” said Vertiv associate director, colo & cloud ANZ, Ben Crowe. “The city’s current 294MW of built-out IT load will reach 520MW by 2028, which is a 40% jump, according to Structure Research. This is representative of several players, including NextDC and Microsoft, recently entering new facilities to the southern market with plans to tap the city’s expanding arena of financial, university, and healthcare organisations.”

 “These businesses are after enterprise-level cloud services, which boast better latency. So, the closer the data centre, the better. And this is particularly relevant with Melbourne’s population set to overtake Sydney’s,” he said. “As the most populous city, there will be more digital users and increased pressure from large corporates demanding faster latency.”

 “This is why we expect to see growth in Melbourne’s west with its flat land, ability to provide large power capacity from the power authority, and proximity to the CBD invaluable for greenfield development,” said Crowe. “Our work with NextDC is delivering just that – the…[operator’s] M2 facility in Tullamarine and M3 facility in West Footscray is set to collectively deliver 210MW of critical IT infrastructure to the region, in addition to more capacity from numerous other industry players.”


[Author: Simon Dux]

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