Giant data centres more than 20 times larger than what they were just a few years ago are coming to Australia due to the surge in the use of artificial intelligence and the huge demands it puts on data storage.
“AI is real. The AI of now is very different from the AI of 10 years ago,” said Robin Kudha, the founder of data centre developer and operator AirTrunk. “The level of growth we are seeing right now is something we have not seen in 10 years. It’s remarkable.”
As a result, he said, a “big” five megawatt data storage centre of two to three years ago that would cost between $15 million to $20 million to build had morphed into a facility in the hundreds of megawatts “in a single deal”.
This would require a whole new level of investment, Mr Khuda said. “It just depends on whether the capital markets are ready, both equity and debt. It’s going to be quite interesting,” he told The Australian Financial Review Property Summit Sydney.
Earlier this year AirTrunk secured a $4.76 billion sustainability-linked loan to refinance the company’s corporate debt, and Mr Khuda said more than 40 banks had participated in the syndication deal.
Highlighting the speed at which AI technology was being adopted, Tim Church, chair of investment banking at Morgan Stanley Australia, told the Summit ChatGPT had hit one million subscribers in six days, compared to Netflix, which took over three years to reach the same milestone.
Appearing with Mr Khuda on a panel discussing opportunities in alternative real estate assets, Chris Tynan, head of real estate at Blackstone Australia, said the amount of capital that would be required to support data centre development around the world was going to be “mind-boggling” given the five big operators have announced $1 trillion of investments globally.
“And the ESG impact of them is going to become a meaningful conversation because they frankly, take up, you know, the resources of a small town,” Mr Tynan said.
Looking beyond data centres and AI, Mr Tynan and Kylie Rampa, chief executive at the Queensland Investment Corporation, agreed real estate debt had emerged as a highly investible asset class given the high returns on offer.
With the big banks pairing back their exposure to sectors like office and creating a gap in the market for debt funding, Mr Tynan said it was a “golden moment for credit” with low double-digit returns on offer on deals Blackstone was doing in the US.
Ms Rampa said QIC had just launched a global debt platform focused on infrastructure and multi-sector debt.
“We’ve had very strong interest and likewise, very, very strong returns,” she said. “There’s going to be great opportunities over the next couple of years until the banks step back in. But definitely because of just where interest rates are, there are much more attractive yields for debt products [than equity], and very good demand right across the globe.”
Looking at other alternative asset investments, Ms Rampa said as a “thematic investor” QIC saw very good opportunities in sustainable agricultural assets, or “natural capital” as they have been labelled.
Having just launched a natural capital platform and been the owner of one of Australia’s largest beef businesses and landholdings – North Australian Pastoral Company – Ms Rampa said QIC saw a “really strong thematic” around agriculture from a food security, land security and food production requirement perspective.
In addition, she said there was the opportunity to provide “stacked returns” by overlaying operating returns and land valuation growth (cumulatively around 10 per cent) along with “pretty significant and attractive environmental returns” from things like generating carbon credit units.
Ms Ramp said she expected the market for Australian carbon credits to hit 60 million a year by 2030, up from about 1.1 million issued in July as corporates and governments seek to meet net-zero emissions targets.
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