With so much going on in the Australia data centre market, and especially Sydney, you could be forgiven for thinking Auckland seems to be in the rear view mirror or an afterthought for many of the bigger players. DC Byte analyst Sarvaesh Mohan certainly agrees that the New Zealand data centre market will likely not see the levels of growth the markets in Australia have been experiencing.
“Auckland is a much smaller market compared to Sydney and Melbourne, coming in at around 175MW total IT capacity with around 70MW of live capacity,” he said. “I wouldn’t count it out…Auckland actually seems better positioned to address demand than Sydney/Melbourne – historical CAGRs suggest that Auckland will require about 190MW by 2028 and this is not too far off the 175MW it currently has in total IT capacity.”
In its H1 APAC Data Centre update Cushman & Wakefield (CW) suggested similar numbers to DC Byte’s more recent figures, with 56MW in operation and 125MW under construction or planned. This is spread over 24 data centres and seventeen operators.
CW head of project & development services, New Zealand, Todd Hanrahan said that since the announcements by AWS and Google on their plans to launch cloud regions in Auckland, other operators have started to consider the market in their regional expansion plans as a cheaper alternative to neighbouring Australia, in particular, Sydney. As a result, the development pipeline for Auckland has doubled since the company’s previous update.
“Also to note, the market has witnessed the average size of data centre in the development pipeline grow from 13MW to 20MW in the first half of the year. Auckland takes up 70% of the data centre market in New Zealand,” he wrote in the report.
Operators entering
And this can be seen by the operators announcing plans. DC Byte’s Mohan said that currently the market leaders are CDC, Spark and DCI and with their various expansion plans this will remain unchanged.
“New entrants would be NextDC with their AK1 (CBD area) that is currently being planned and potentially Goodman which has industrial plots south of the Auckland CBD,” he said.
Despite the growing enthusiasm the arrival of the hyperscalers had on the overall market, more recent developments have changed the tone of market sentiment. New Zealand’s new government announced some hefty belt-tightening for public sector IT spend earlier this year. The telcos supplying the enterprise market all reported tough trading conditions and analysts are pointing to softening IT spend across New Zealand businesses.
This led to a article by iStart in March [1] querying what had happened to the promised DC boom from a few years earlier. Amazon Web Services announced plans in 2021 for its $7.5 billion AWS Asia Pacific (Auckland) region and at the time suggested its Westgate facility would be up and running by this year.
According to the report, while land was cleared for the data centre, and two small artificial wetlands were drained, the property remains empty. Ostensibly the delay hinges on stormwater issues but the timing is interesting.
Also in Westgate, Microsoft’s facility which was also meant to open this year has also been held up for reasons unknown. Although developments hit obstacles all the time, both hyperscalers have competing priorities right across APAC in much larger markets. Westgate as an area is also having traffic issues which impact planning and could even send the hyperscalers land banking alternative sites.
Despite the delays to the hyperscalers’ facilities, there is still plenty of demand for their public cloud services. For example, Microsoft New Zealand has just announced that Whakarongorau Aotearoa /New Zealand Telehealth Services (Whakarongorau), will become an anchor tenant of its forthcoming hyperscale cloud region. Whakarongorau provides 35+ health and mental health services across digital channels, responding to 1.8 million contacts and supporting 1 in 4 people in New Zealand across FY24.
Big advantage
Despite the comparative market size meaning prospective data centre operators need to carefully plan for market demand and the required capacity, there is no denying a key advantage New Zealand has – renewables.
“Generally New Zealand as a whole is less constrained when it comes to land and power – especially the South Island – they are also pretty big on renewables,” Mohan told W.Media.
“The abundance of renewable energy generation available in the form of hydro, geothermal, wind and solar in New Zealand also adds to its appeal as an attractive market for unique sustainable data centre developments,” wrote CW’s Hanrahan. He pointed to Spark’s plans to build a 40MW data centre in Auckland’s North Shore which will be partially powered by an on-site seven-hectare solar farm.
T4 is planning green data centres [2] and Datagrid New Zealand is planning a ‘carbon neutral hyperspace data centre’ in Southland, having acquired 43ha in Makarewa.
Connectivity shift
Hanrahan points out that once proposed undersea cables arrive, this specific advantage could attract more intensive data centres given the power and cooling advantages.
“Vocus announced that they had signed an agreement with Google to extend the Honomoana cable that planned to connect the US, French Polynesia and Australia, to include New Zealand, via Auckland,” he said. “Vocus will also add a domestic route between Sydney and Melbourne, and when combined with their existing cables, their network will span from Southeast Asia to the US via multiple landing in Australia, New Zealand, and the Pacific.”
Intelia, another company founded by Hawaiki Cable founder Galasso, also announced a submarine cable project linking Invercargill with Sydney and Melbourne. Soda’s SMAP cable will also come into play.
Mohan believes that like many markets, AI could have an impact in the future – Datagrid is already positioning its South Island facility as an AI hub. “Sydney is still getting the lion share of attention and Auckland appears to be biding its time,” said DC Byte’s Mohan. “The overall picture is that in the mid term, Auckland is poised to meet its growing demand but AI could cause runaway demand. It’s definitely a market to keep an eye on, particularly if concerns grow around Sydney over time.”
[1] https://istart.com.au/news-items/what-happened-to-the-kiwi-data-centre-boom/
[2] https://w.media/t4-group-looks-beyond-auckland-for-data-centre-strategy/
The New Zealand Cloud & Datacenter Convention 2024 takes place on 31 October 2024 at the Grand Millennium Hotel Auckland. The convention will look at New Zealand’s unique position in the data centre world and its opportunity to maintain this through sustainable digital growth and all that this approach entails.
To attend, please visit: https://clouddatacenter.events/events/new-zealand-cloud-datacenter-convention-2024/