Melbourne Emerges as Australia’s Fastest-Growing Data Centre Hub
Melbourne is rapidly closing the gap with Sydney in Australia’s data centre market, with supply nearly tripling to 4.7GW as land and power constraints push development southward.
According to Knight Frank’s latest Asia-Pacific Data Centre report, Melbourne’s live IT capacity has reached 337.1MW, marking a 25.4% year-on-year increase. The city now hosts dedicated cloud regions from all four major US providers: AWS, Microsoft, Google, and Oracle.
This growth trajectory is expected to continue, supported by a pipeline of 934.8MW in committed and under construction projects. In the first half of 2025, Melbourne saw 127.6MW of transacted capacity, with artificial intelligence representing 95% of all colocation take-up.
Knight Frank Partner and Head of Industrial Investments, Angus Klem, said Melbourne was stepping into the spotlight as a hub for next-generation digital infrastructure.
“Accelerated demand for cloud and AI services is driving strong growth, supported by a solid industrial real estate base and a favourable business environment,” he stated.
Mr Klem said that Melbourne offers advantages over Sydney’s increasingly constrained market. “With Sydney grappling with land power constraints Melbourne presents a more attractive alternative, offering larger, more accessible land parcels and fewer grid limitations.”
Despite Melbourne’s rapid growth, Sydney remains Australia’s largest data centre market. The report found Sydney’s aggregate supply grew by 16.4% in the first half of 2025, surpassing the 5.2GW mark. During this period, 18.9MW of new capacity became operational, bringing total live IT capacity to 757.0MW.
Major operators continue to invest heavily in the region. NEXTDC increased its 2025 capital expenditure guidance by AUD$100 million, citing rising AI-related demand. Meanwhile, AWS announced a significant AUD$20 billion, five-year investment programme across Sydney and Melbourne.
“Sydney continues to operate as a traditional cloud market, with steady pre-lets and slower ramp-ups,” Mr Klem said. “Rising costs, land and power constraints limit scope for AI expansion and customers are increasingly leveraging Sydney’s connectivity to service regional cloud demand.”
The broader Asia-Pacific data centre market is experiencing explosive growth. In the first half of 2025, the region secured nearly 13GW of new project announcements, a 160% increase compared to the same period last year. The funding needed for these projects already exceeds US$180 billion.
Knight Frank’s Head of Data Centres Asia-Pacific, Fred Fitzalan Howard, said the regional expansion was significant.
“The sheer volume of new projects in the region highlights just how important the region has become in the global digital infrastructure landscape,” Mr Fitzalan Howard said. “However, coordinating this rapid growth is a complex challenge, as operators must keep pace with advances in technology and rising energy needs, all while ensuring new facilities are delivered in step with evolving demands.”
“What has become clear is the strict requirement for operators to design facilities with capacity that can be flexibly deployed for either Cloud or AI workloads, offering tenants maximum optionality. While this adds cost, it is now a decisive factor in site selection.”
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