Why data centres are getting too big for single investors

The reality of building modern data centres in Australia is that they require greater capital investment than a single entity can provide. With multi-building campuses now standard, the investment model that once saw businesses develop, lease and hold assets under a single ‘whole-co’ structure is being turned on its head. 

The result is a structural transformation that is already reshaping Europe and the United States, creating opportunities for a new swathe of investors Down Under.

“For years, the country's data centre sector has been dominated by domestic players maintaining integrated operations,” says Luke Jackson, co-head of Data Centre Capital Markets - Asia Pacific, JLL. “This model created barriers for new entrants and limited international investor and operator participation. But the capital intensity of today's projects is breaking this model apart.”

The separation of property ownership (PropCo) from operations (OpCo) is becoming the new norm. 

“When a single campus development can require four or five buildings plus power infrastructure delivered across multiple phases, traditional single-entity ownership becomes impractical,” Jackson says. 

The decoupling creates distinct entry points for different capital types. Real estate investors that previously profited from land transactions are now pursuing development joint ventures, partnering with specialist data centre operators to fund construction while leveraging operational expertise.

This structural opening arrives as Australia's market faces significant supply constraints that are altering economics. 

Three factors are driving growth and demand: Cloud loads continue to grow exponentially, consistent with the five-year average. Artificial intelligence demands substantial compute power and neo-cloud (clouds built specifically for AI) providers are racing to access data centre capacity to monetise their investments in graphics processing units (GPUs).

“This demand has absorbed all speculative development. AI workload requirements have driven an increase in build-to-suit commitments. Australia now has ultra-low vacancy rates and minimal near-term available capacity,” Jackson says.

Power availability has emerged as the primary barrier to entry, particularly in Melbourne and Sydney. Since 2025, both power supply and connection timelines have tightened considerably due to new development acquisitions and large scale pe-commitments.

After five years of flat pricing, certain Australian markets experienced meaningful rental growth in 2025, specifically where power constraints reached an inflection point. This trend will likely spread across all ‘availability zones’ (a location that has isolated power, cooling and network infrastructure) and cloud regions as power limitations intensify. 

In terms of rental growth, Australia is approximately three years behind more mature markets. Europe currently sees 15% year-on-year rental growth in primary markets, while the United States records 10% growth. Australia appears positioned for similar growth as supply-demand imbalances persist.

In Sydney, availability zones for cloud providers are concentrated in Macquarie Park and North Ryde, Artarmon and St Leonards, plus Eastern Creek, Marsden Park and Fairfield in Western Sydney. Melbourne availability zones are in West Footscray and Deer Park, Port Melbourne and Dandenong and Kilsyth. 

However, demand is quickly expanding outside these traditional availability zones, says Thomas Madigan, head of Data Centres Capital Markets Australia.

“Developers and operators are reviewing regional areas in New South Wales and Victoria as well as emerging areas like Perth and parts of Queensland, where power availability, limited competition and speed to market are major advantages.”

Project finance for vertical development backed by hyperscale contracts remains liquid. Loan-to-cost ratios of 70-80% are achievable on pre-committed projects, with some European transactions approaching 90%. 

"Developers are establishing borrowing bases with lender syndicates that provide multiple financing options: project finance for vertical construction, land conversion funding, speculative development capital, and refinancing facilities for stabilised assets,” Jackson says.

Luke Jackson was speaking at the Data Centre Leaders Summit in Sydney on 18 March.

 JLL's Data Centre Capital Markets team provides comprehensive advisory services across the full investment lifecycle. We connect institutional investors with development opportunities, structure PropCo/OpCo partnerships and advise on capital deployment strategies tailored to Australia's evolving market dynamics. Our specialists deliver market intelligence on supply constraints, power availability, rental trajectories, and financing structures to help clients navigate this capital-intensive sector. Whether you're seeking to enter the Australian data centre market or optimise existing holdings, our team provides the expertise and relationships to identify and execute high-value opportunities.