Australia’s data center market has expanded by 40 times in 20 years, with two-thirds of this growth coming since 2020, according to research from advisory firm M3 Property.

In a report, Data Center Growth in Australia – November 2025, M3 said Australia's total occupancy expanded from 37MW in 2005 to 1.3GW in 2025. This forty-fold increase is largely due to the rapid digital transformation of the economy since the rise of remote work during the pandemic, followed by the surge in AI computing demand.

Despite this substantial growth, demand for data center capacity is outpacing supply for the first time on record.

Citing Colliers Research and DC Byte data, M3 noted that a demand imbalance has been building since 2021. Between 2021 and 2024, total net take-up was greater than the total new supply added to the market.

“The Australian data center property market has now reached a critical inflection point where demand is outpacing supply. For the first time on record, the volume of live data center capacity taken up by users in 2023 and 2024 exceeded the amount of new supply brought to market,” said James Ruben, national director, Specialised Assets at M3 Property.

“The result is a widening gap between supply and demand. This represents the longest sustained period of demand growth exceeding supply growth since records began in 2005, underscoring the sector’s increasing strategic and economic importance.”

According to M3, Australia is now regarded as a “preferred location" for hyperscale data centers, cloud infrastructure, and AI innovation,” shown by “landmark” investment from major technology companies and institutional investors.

This attractiveness is due to several factors, such as Australia’s “transparent and predictable regulatory environment,” the Security of Critical Infrastructure Act, and secure energy grids, the report said.

“Strong economic fundamentals, rapid digital adoption, and a stable political environment provide long-term certainty, while secure energy grids in key precincts address one of the most critical operational requirements for data centers,” M3 added.

Australia’s growth as a data center hub has drawn significant attention from hyperscalers and other investors.

Earlier this year, Amazon announced a record $20 billion investment in Australia’s data center infrastructure, including the build-out of three new solar farms.

However, Australia suffers from the same data center growth pains that are affecting markets around the world, such as supply constraints, power availability and grid challenges, and high construction costs.

And the gap between supply and demand is continuing to grow. According to M3, a supply gap of between 700MW and 1.7GW could emerge by 2028, despite continued increases in live capacity.