Data Centres’ Cool Solution Hands Office Assets Lifeline

Lauded as the technological revolution of our time, artificial intelligence could also be on the cusp of transforming flagging office assets as new tech paves the way. Reset Data is a data centre provider specialising in Liquid Immersion Cooling (LIC) technology and smaller scale ‘edge’ data centres. Centuria acquired a 50 per cent stake valued at $21 million in the company in August. “It’s a huge opportunity for us; we get a well-organised partner to help us grow our business with a huge portfolio to review,” Reset Data joint chief executive Marcel Zalloua says. The company’s flagship project for Centuria is at 818 Bourke Street, an office building in Melbourne’s Docklands, where it is delivering a 1.5mW edge data centre supported by LIC technology. ▲ LIC submerges hardware, including servers and central processing units, in a non-conductive liquid bath, transferring heat to the coolant. “We are aiming to be operational by mid-2025 and it will be the benchmark in terms of what we think will be required in the future. “One of the key elements of an office-based data centre is the reduction in latency, meaning faster processing for businesses in close proximity,” Zalloua says. This could be a gamechanger for flagging office assets with vacant or surplus space, transforming them into data centres that can sell computing power to surrounding businesses, especially those reliant on AI. “Traditionally you might get say $300,000 in rent from a commercial office but for that same space they can now get $3 million in rent—that’s a significant uplift for the owners of the property in both rental return and a value uplift,” Zalloua says. “You look at those traditional office leasing models and the trajectory of AI adoption going up ... which train do you want to be on?” Offices as data centres The mental image of data centres is of mammoth industrial-style buildings housing kilometres of blinking lights—the ‘racks’ that house servers. Due to overheating, one such rack may only be 20 per cent operational within a conventional data centre that uses air-cooling, according to Zalloua—and the temperature produced by these servers has only increased in recent years. “That’s because the heat dissipation is not as efficient, compared to LIC technology, which allows more density and more computation so you need less space,” Zalloua says. “We have created an ecosystem around the LIC pod and commercialised it so it’s not sitting solely in big data centres but also in small centres at the basement of a building, and we know we can apply this technology to commercial assets to generate revenue. ▲ Reset Data entered into a 10-year lease for 600sq m of space at Centuria’s A-grade 818 Bourke Street office to repurpose it as a data centre. “Real estate owners are allowing their most valuable piece of infrastructure be sent down the road to be aggregated in a data centre, but this is an opportunity to bring amenity back to the asset, control it, own it, give it to tenants and add value.” It’s fair to say that the only office assets doing well in terms of vacancy rates and valuations these days are A-Grade. “They are looking at ways to provide amenity to tenants, whether it’s end-of-trip facilities or hospitality,” Zalloua says. “However, commercial real estate can play a leading role in providing the infrastructure needed for this AI revolution, providing a solution, in an environment where valuations are declining and adding significant value to those assets.” Cushman &amp; Wakefield’s Australia lead for the Asia-Pacific data centre advisory team, Alex Moffatt, says that right now, LIC technology is early stage and is having its biggest impact within major data centres themselves. “[It allows] rack densities to increase from 7kW/rack to 140kW/rack, and almost all data centre operators in APAC have developed strategies to accommodate liquid cooling across their portfolios as this is the largest growth market in the next five years.” Challenges of new technology As with any emergent tech, it has its challenges. “Liquid cooling is currently only economical to deploy for particular deployments, largely AI related,” Moffatt says. “The combined costs of both the hardware and construction of new data centres means that not all workloads will migrate to liquid cooling as it is not economic. “The construction cost premium for a multi-storey data centre for LIC compared to current air-cooling is 12-15 per cent, which reflects the additional costs associated with steel and concrete in the building structure. ▲ Data centre player NextDC teamed with EngineRoom, an LIC technology company, in 2021. “These changes increase the amount of electricity required for data centres and need new engineering requirements due to the point loads associated with increased equipment weight.” It also creates “significant” heat management and outage leak issues, Moffatt says. “[But] we do have clients who are testing liquid cooled racks at 140kW/rack in Australia and Singapore.” These early stage challenges mean we’re not likely to see the end of air-cooled big-box data centres just yet. “Many office tenants have downsized their building floor areas to save costs and moved data requirements to data centres,” Moffatt says. “These office tenants would need to reverse their entire IT policy to move back to on-premises hardware and the associated costs of leasing that floor area.” ▲ The global cloud service market is expected to exceed $US2.2 trillion by 2032, with Australian cloud services up 19.3 per cent annually to $A23.2 billion in 2024. Zalloua says that in some offices, however, edge data centres could use underutilised space. “Offices 10 to 15 years ago used to have a computer room to power their system with UPS [Uninterruptible Power Systems] that drove their day-to-day business,” he says. “Over the years the aggregation of that data has been taken off-site. They would have been given a certain amount of power to power-up floors, as buildings have become more efficient, moving comms room offsite, it’s also given the building excess power.” With national office vacancy rates sitting at 14.6 per cent for the six months to July of this year, according to the Property Council of Australia, there’s certainly space to go round. The future of data According to Cushman &amp; Wakefield’s data centre update for the first six months of 2024, Australia’s capability expanded by 177mW, making it the fastest-growing data centre market in the APAC region, although by no means the largest. Sydney was the leading hub for data, and was responsible for more than 65 per cent of the nation’s operational IT capacity and pipeline, it said. This makes the decentralisation allowed by smaller ‘edge’ data centres even more appealing to some, as industrial land gets tight in Sydney. “[Data centres deliver] only a portion of what is required so it’s not one or the other, they can complement each other and both have a job to do,” Zalloua says. ▲ ResetData launched a lab with two 100kW pods at Investa’s 151 Clarence Street Sydney address last year. “They need to be interlinked and interoperable, so it’s a case of how do we create that edge data centre network but remain backed up by bigger players?” Given that, as billionaire Dell Technologies chief executive Michael Dell claimed at this year’s South by Southwest conference, we will need 100 times more computing power than we currently have in 10 years, new technologies are essential to provide this power. While the take-up of liquid cooling in APAC is 18 to 24 months behind the trends of North America and European markets, according to Cushman &amp; Wakefield, this could prove a bonus. “We have a unique opportunity where we can learn from what’s happening globally and make the changes early to enable us to sustain what is coming,” Zalloua says. “We might be behind but we could be better prepared for what’s coming and that’s an advantage.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

Data Centres’ Cool Solution Hands Office Assets Lifeline

Want to read more?

Beyond Energy Efficiency: Cutting Carbon Property’s New Frontier

Mirvac Monopoly: BtR Pioneer Plots East Coast Domination

Keeping the Lights On: Growing Pains Jeopardise Industrial Boom

What’s Driving Pro-invest Push into ‘Underserved’ Micro-Apartments

Sydney Pub Market Rebounds After Post-Covid Lows

Fireside Chat | Inside GemLife With Adrian Puljich

Building Australia's Newest Airport: Multiplex

The Makers Of The Mondrian | Design, Vision And Delivery Behind One Of Australia’s Most Anticipated Luxury Hotels

Next Gen Now | How Emerging Developers Are Redefining The Game

Yugo Tops Out $193m PBSA Block in Perth’s South-East

Construction Code Pause Wins Ministers’ Endorsement

Fund Manager Pays $80m for Brisbane Riverfront Offices

Healthscope, NSW Ink $190m Northern Beaches Deal

Commercial Real Estate Summit

Urban Leader Awards

Property Development Masterclass Series

Long Lunch Series