Melbourne overtakes Sydney in Australia data centre boom

Data Centres Australia has released the second edition of its Australian Data Centre Forecast Report, projecting national operational capacity will reach 3.9GW by 2030.

Produced with DC Byte, the study says Australia currently has 1.6GW of operational data centre capacity across 163 facilities tracked for the report. It also says the development pipeline has expanded sharply over the past six months, with 5.2GW added to the total forecast since April.

The figures point to a market that is still growing, but with notable shifts in where projects are advancing. While Sydney has long been the country's dominant hub, the latest numbers show Melbourne now surpasses Sydney in total forecast pipeline capacity.

Operational capacity rose by 0.1GW during the period covered by the report. Capacity under construction doubled from the previous period, split evenly between Sydney and Melbourne.

One of the clearest shifts was projects moving from early-stage planning into committed development. Melbourne recorded 1.2GW moving into the committed category, compared with 0.7GW in Sydney.

The report links that gap to planning and approvals. It says the movement in Melbourne may reflect faster approval processes under the Victorian Government's Development Facilitation Program than under the New South Wales State Significant Development process.

By contrast, Sydney recorded a fall in forecast pipeline volume. Its total pipeline dropped by 3.6GW, while early-stage capacity fell by 4.4GW.

The report says the decline is significant and likely reflects a combination of energy constraints, less certain policy approval timelines and recent policy announcements in New South Wales. It suggests investors and developers are becoming more selective about where they place large-scale digital infrastructure projects.

Melbourne moved in the opposite direction. Its total forecast pipeline increased by 1.7GW, with only a 0.3GW rise in early-stage projects, indicating much of the change came from schemes progressing through the development process rather than from a surge in newly announced sites.

This pattern may reflect faster approval times in Victoria and what the report describes as an "open for business" message from government. It also notes that later editions may show the effect of more recent policy changes.

Beyond the main hubs

The data also points to a broader geographic spread of data centre development. Outside Sydney and Melbourne, the total forecast pipeline has increased from 19% to 31% over two years.

That shift includes early-stage projects in Queensland, Tasmania, South Australia and Western Australia. The trend suggests developers are looking beyond the two largest east coast markets as power availability, planning settings and land options shape site selection.

For state governments, that could bring both investment opportunities and pressure to prepare electricity networks, planning frameworks and industrial land for large data-intensive facilities. Data centres require significant, reliable energy supply, and several markets are now competing to attract projects linked to cloud computing and artificial intelligence workloads.

The report argues that policy settings are emerging as a major differentiator between states. Faster approvals and clearer planning signals appear to be helping Melbourne and a broader group of regional markets, while uncertainty around energy and regulation is weighing on Sydney's near-term pipeline.

Demand drivers

The projected rise to 3.9GW of operational capacity by 2030 is tied to growing demand for cloud services and AI compute. These uses have become a central factor in data centre investment decisions, particularly as businesses and public sector bodies increase their use of digital services and machine learning tools.

Even so, the report indicates that supply growth will not depend on demand alone. Energy access, capital availability and national standards for AI infrastructure are among the factors that could shape the market over the coming months.

The latest forecast adds to evidence that Australia's data centre sector is entering a more dispersed and more policy-sensitive phase. Growth is continuing at the national level, but the balance between cities is shifting as developers respond to approval timelines, electricity constraints and government positioning.

With 97 additional facilities forecast by 2030, the sector remains on track for substantial expansion, though not evenly across the country. The report says Australia's data centre development footprint is expanding beyond Sydney and Melbourne, with the total forecast pipeline outside the two hubs rising from 19% to 31% over two years.