[+] Artificial Intelligence Fuels Explosive Growth in Data Centres

Fortnite—the six-year-old player-versus-environment online game—is played by around 500 million people across the world, according to figures released in March last year. It was the number one played video game in 16 countries last year. Including Australia. Twelve Amazon Web Services (AWS) data centres with 24 availability zones support the massive computing load and provide a seamless gaming experience. Just 13 months ago a small San Francisco tech company introduced a new online chatbot that, using Artificial Intelligence (AI), can answer complex questions, write poetry and even mimic human emotions. Many experts believe these new chatbots, such as OpenAI’s technology it calls GPT-4, will reinvent or even replace internet search engines like Google and Bing. As well as a host of other functions. And Australia has been quick to embrace the tech industry’s shiniest and newest toy. The Australian telecommunications company Optus, for example, has introduced Call Translate. Built, owned and operated by Optus using Google Cloud translation, it puts AI between a telephone call from Australia to India. And the caller listens to a simultaneous translation from Hindi to English. Other service providers are looking at things like virtual call centres. “It’s starting to be indistinguishable talking to a virtual call centre operator, as opposed to a real person in a first-level call,” Cushman and Wakefield data centre advisory team leader Alex Moffatt says. And the use of AI in education, says ADP Consulting director John Vollugi, is about to explode. “There are people creating data banks of knowledge, and you’ll use a chatbot to ask a question and to get answers,” he says. “Some of the tertiary learning, some of the remote learning for schools ... that is now all being databased, and in theory you could be studying remotely with a chatbot. “And some of those will be a rendered, computer-generated person,” he says. “You’ll feel like you’re talking to a person… but it’s a computer.” ▲ Next DC’s Tullamarine data centre in Melbourne. All of these applications—gaming, call centres, rendering images, health, education, crypto currency mining—have one thing in common. They need massive computing power. And that means data centres. By most estimations there are currently about 300 data centres across Australia, with Sydney (and regional New South Wales) hosting about 60 per cent of them. But critically, the online property development monitor BCI Central shows at least another 42 data centres have gone into various stages of planning or development in the past 18 months. Collectively, they represent a capital investment of slightly less than $10 billion. Perhaps most significant, those data centres built in the past two years came with capacities of 20 to 30MW, or enough for cloud storage. Those coming out of the ground in Sydney and Melbourne in the next 12 months, will have up to 10 times that capacity. Such is the ability of AI to drive the market. And as a market, data centre development is booming. Speed the issue “The biggest challenge we face is speed,” says Melbourne-based Kapitol Group director Dave Caputo. “We’re building envelopes for data centres faster than you can procure the equipment that goes in them,” he told The Urban Developer . “There is heaps and heaps of work about.” In July of 2021, home-grown, Brisbane-based and publicly traded data centre operator NextDC paid a reported $124 million for a 12.4ha site in Horsley Park, about 35km west of Sydney. In October last year, the biggest locally owned and operated data centre provider then lodged plans for a 300MW data centre on the site, with a technical floor area of about 124,000 square metres. Documents before the NSW Department of Planning and Environment show six buildings will rise to 38 metres. Constructions costs will be $4 billion. NextDC head of marketing Glenn Flower described it as “a significant development.” “As our customers and partners are increasingly utilising AI’s capabilities for various applications and use cases, they are and will rely heavily on NextDC to manage the critical digital infrastructure which supports vast datasets as well as ensure access to secure and high-speed connectivity for data management, storage, processing and retrieval when needed,” Flower said in response to written questions. ▲ AirTrunk and NextDC have both expanded development abroad. In October, AirTrunk announced this facility in Osaka, Japan. Not to be outdone, Australia’s other big data centre player, Macquarie-backed AirTrunk, has filed plans for its own giant data centre, also in western Sydney. With a capacity of more than 320MW, it will be the biggest in the country. Known as SYD3, the data centre will be built in stages and include two substations, 30 diesel fuel storage tanks, 216 emergency back-up generators, three below-ground water tanks—each with a 335,000 litre capacity—172 hybrid dry-coolers and 86 water-cooled chillers. Design estimates by Greenbox Architecture show the building itself will rise nearly 50m and house 2592 lithium-ion battery cabinets, with a total weight of about 730 tonnes. AirTrunk, which counts Macquarie Asset Management and the Public Sector Pension Investment Board (PSP Investments) as major stakeholders, acquired the 9ha site at 51 Huntingwood Drive, 30km west of Sydney, in November, 2021 for $110 million. SYD3 is AirTrunk’s third Sydney data centre, joining SYD1, also in western Sydney, with a capacity of about 130MW, and SYD2 in the city’s north with 110MW. “With SYD1 nearing full capacity, SYD3’s location less than 1km away will help our major technology customers scale with ease and creates synergies and efficiencies between the connected campuses,” AirTrunk founder and chief executive Robin Khuda said when the plans for the hyperscale data centre were first mooted. Foreign investment rolling in There has been a flurry of deals and announcements during the past 12 months as foreign investors and global players look to capitalise on Australia’s burgeoning market. In October, Microsoft announced it would invest $5 billion in expanding its hyperscale cloud computing and AI infrastructure in Australia over the next two years. Microsoft vice chair and president Brad Smith said the investment will grow Microsoft’s local data centre footprint from 20 sites to a total of 29 spread across Canberra, Melbourne and Sydney. “The investment will also enable Australia to capitalise on the significant economic and productivity opportunities presented by the latest AI technology” Microsoft said at the time. A joint report by the Tech Council of Australia and Microsoft found that generative AI—if adopted at an accelerated pace—could contribute as much as A$115 billion a year to Australia’s economy by 2030. The company said it would also extend its global skills programs to help more than 300,000 Australians gain the capabilities they need to thrive in a cloud and AI-enabled economy. Elsewhere, and in April last year, Amazon Web Services (AWS) announced it planned to invest $13.2 billion in its existing cloud infrastructure in Sydney and Melbourne over the next four years, to meet growing customer demand for cloud services in Australia. According to the newly launched AWS Economic Impact Study (EIS) for Australia, this investment is estimated to contribute $35 billion to Australia’s total gross domestic product by 2027. ▲ Australia’s IT load capacity is projected to grow steadily and reach 3,181 MW by by 2029—almost double the capacity of 2022. The planned investment into AWS data centre infrastructure in Australia will support an estimated average of 11,000 full-time jobs including construction, facility maintenance, engineering, and telecommunications, among other roles. “Investors across Asia-Pacific have identified modern data centres as an attractive asset class, particularly as data centres are increasingly classified as social infrastructure,” Cushman and Wakefield’s Moffatt says. “(We) currently have mandates from investors for over $US5 billion ($7.6 billion) of capital to be deployed in the Australian data centre market. “They are all expanding at a rate of knots. We’ve been sourcing sites for two of the three large hyper-scalers over 2023. They are now looking for sites for 200MW facilities.” That level of development brings its own problems. Builders Kapitol Group built its first data centre nearly six years ago, when it was asked to deliver a small data centre in Tullamarine, in Melbourne’s north. Today it is the biggest builder of data centres in Victoria and one of the biggest in the country, completing 14 facilities in the past five years. Its current pipeline is about $850 million across four contracts. Much of that work has been for NextDC. Labour, hardware stifles developments “It’s a very different team profile to what you would run for any other project,” Caputo says. “We used to run our teams with finishers, coordinators, structural co-ordinators, and facade co-ordinators,” he says. “Now, the bulk of our teams are all electrical engineers, mechanical engineers, hydraulic engineers, communications engineers, and commissioning agents and all that sort of stuff.” And as other builders and developers enter the market, holding onto staff can be an issue, he says. With the increasing amount of work, a ready supply of the sophisticated equipment needed for data centres is also an increasing problem. “They can build the structure very quickly, using prefabrication technologies,” says ADP’s Vollugi, “but the longest lead time is for the equipment that goes inside, things like chillers, cooling towers and generators. “In some cases you are talking about ordering years in advance.” ▲ ADP Consulting’s Joh Vollugi: Perth is seeing a lot of the data centre market at the moment. Cushman and Wakefield’s Moffatt says he’s heard of developers placing orders for the big, Rolls Royce generators favoured for data centres five years in advance. But more than skilled labour, money, planning permits or generators tech companies this year are desperate for Graphics Processing Units (or GPUs), the specialised electronic circuitry designed to accelerate computer graphics and image processing. Nvidia, the Silicon Valley company which has long provided the chips—and briefly boasted a trillion-dollar (US) valuation—has a virtual monopoly on the market. The AI explosion has led to long lead times. “The manufacturing for the GPUs wasn’t really tooled up for the scale of the demand,” says Moffatt. “The hyper-scalers placed orders that basically soaked up all of the supply that Nvidia was to manufacture for 2023.” While the big populations of Sydney and Melbourne mean much of the country’s data centre development remains on the eastern seaboard, Perth and Western Australia is quickly coming into its own. Early last year US data centre provider Stack Infrastructure announced it had partnered with Melbourne real estate developer Hickory to expand into Australia. The company revealed plans to build data centres in Melbourne, Canberra and Perth, including two 36MW data centres in West Melbourne’s Truganina, a 28MW data centre in Hume, Canberra and a 24MW data centre in Wangara, Perth. Perth’s climate and the solar and wind power it can generate has led to cheap energy. And data centres are hugely energy intensive. “At certain points of the day,” says Moffatt, “Perth literally creates so much excess that there’s actually a negative tariff bill. ▲ When completed, AirTrunk’s 320MW facility in western Sydney, will be the biggest in the country. “So there is a price position for that power that’s really not matched anywhere else in Asia-Pacific at the moment.” It’s a phenomenon not lost on other countries in South-East Asia. Last year, and after a four-year moratorium, Singapore again began issuing licences for data centres. That ban was in response to the rapid growth in data centres in the small island city-state which had been using alarming amounts of energy, and land. Data centre production moved to Malaysia, where coincidentally Next DC plans a facility. There will be a sod-turning ceremony in the first quarter of this year. And remember, much of Australia’s international fibre connectivity passes through Perth, Port Hedland and Darwin. Asia looking to Australian centres Of NextDC’s 13 operating data centres, two are in metropolitan Perth. And in August last year it announced it would partner with Microsoft and BHP to build a data centre in Port Hedland, in WA’s far north. One of the other partners in that data centre? Vocus, the specialist network solutions provider, which in March last year began rolling out the final $100 million segment of its Darwin-Jakarta-Singapore Cable system. Which will be routed via Port Hedland. “And that's why I think why Perth seems to be getting a lot of market at the moment,” says Vollugi, “because Asia is looking more south towards us, than maybe north towards China.” Moffatt agrees. “Essentially Perth has benefited from direct cable connection, but the biggest thing is probably its power, and particularly renewable solar and wind power,” he said. “The view is basically that Perth is the next market to watch.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Artificial Intelligence Fuels Explosive Growth in Data Centres

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