Microsoft Lodges Plans for $150 Million Inner-City Data Center

Microsoft is pursuing plans for a $150 million data center on a major industrial site along the West Gate Freeway in inland Melbourne’s Yarraville.

The development is planned for a 22,500 sq ft site at 20-28 Cawley Road, part of a larger 130,000 sq ft site that the tech giant bought from Time and Place in 2021 for $90 million.

It will be across the river from the massive 480-acre urban regeneration project in Fisherman’s Bend.

The proposal, which includes approximately 5,000 square feet of data storage and manufacturing space, 1,200 square feet of additional office space and 400 square feet of circulation space, is part of a global rollout by the US software giant.

The company indicated in early 2021 that it planned to build between 50 and 100 centers a year around the world.

The development, known as MEL4, would sit next to a larger MEL5 data center, which has yet to be submitted to the city of Maribyrnong.

Documents for the proposal from engineering firm Dem were on display earlier this month. Microsoft’s role is buried in the details of those documents, and the US player has not responded to requests for comment.

They show a two-storey data hall designed to operate at a higher than normal temperature, up to 35 degrees, while the water requirement can be around 50,000 cubic meters, mainly for cooling.

▲ Demand for hyperscale data centers, which support cloud computing and big data storage, is rising due to rising technology and internet usage. Image: Dem

Late last year, Microsoft unveiled similar-scale plans for a $1.3 billion data center in Kemps Creek in western Sydney.

The 190 megawatt facility will be built on a large industrial estate being developed by Frasers and local fund manager Altis Property Partners.

Kemps Creek’s proposal, the company’s largest commitment in Australia to date, includes a pair of two-storey buildings spanning nearly 61,000 square metres.

The emerging asset class is now recognized as the second most popular alternative class in terms of investor intent, narrowly behind real estate debt and ahead of healthcare and student life.

Data centers have been hot property for investors during the pandemic as increasing reliance on cloud storage, which has facilitated the popularity of digital subscriptions to services like content streaming platform Netflix, was pushed to its limits during nationwide lockdowns.

According to a recent report from CBRE, a third of Australian property investors surveyed are actively looking to invest in data centers by 2022, compared to just 2 percent in 2018.

The tight market is currently controlled by a handful of large companies that either provide cloud services, such as Amazon, Google and IBM, or industry specialists such as Equinix or NextDC who build, lease and operate data centers.

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