NEXTDC opens $1.5b data centre in Melbourne to feed the insatiable ‘data beast’

Digital infrastructure group NEXTDC (ASX: NXT) has officially opened its largest data centre yet, a $1.5 billion Melbourne facility that is five times the size of the MCG, with CEO Craig Scroggie revealing the increasing scale of the company’s centres was essential to meet an explosion in demand for data storage.

The opening of the M3 data centre at West Footscray, the third built by NEXTDC in Melbourne, comes just weeks after the company opened a $1 billion data centre at Artarmon in Sydney's lower North Shore – the largest of three it has built so far in the NSW capital.

But while the S3 facility in Sydney has a target capacity of 80 megawatts of critical IT power, the new Melbourne data centre will deliver 150 megawatts, or almost twice that capacity.

Scroggie concedes the new Melbourne facility is a ‘very significant undertaking’ – a property that is ‘four to five times the MCG that we will be filling with computers’.

“But with the underlying compute we do every day, it all has to live somewhere,” he tells Business News Australia.

“The estimate is that every 18 to 24 months the amount of data that exists in the universe doubles. So, every couple of years the amount of information will be twice as much as we have today.

“Companies tend to keep information because they don’t classify it well. They don’t know what they should keep and what they should destroy, so the default position is to keep everything. This mass of information, whether it is in the corporate or personal world, is being stored at a time when we are creating more data than ever at any point in time.”

It’s one of the reasons NEXTDC is currently planning a mega data centre in Sydney, a facility with a target capacity of 300 megawatts. The S4 facility will have more than twice the IT power capacity of its existing Sydney facilities combined and is planned for a 12.4ha site at Horsley Park in the city’s west.

The demand for data storage is driving a rapid roll-out of new centres by NEXTDC across Australia, with facilities in Adelaide and Darwin currently in train. This builds on the company’s existing network of centres in Brisbane, Canberra, Perth and the Sunshine Coast.

While the Brisbane-based NEXTDC has flagged intentions to expand its network into Asia, Scroggie says regional Australia could be an area of interest for the company.

“I think regional communities and edge computing are among the most exciting growth opportunities over the next decade,” says Scroggie.

“That is regional communities and areas where there is significant data that needs to be stored at the edge. It might be a mining company that has to have its mining safety systems close to the users, therefore the data and the applications and infrastructure have to be close to the business it is supporting.

“Regional communities also create a lot of business, for example, ag businesses that are managing telemetry for agriculture systems. A lot of that infrastructure needs networking and computing capability, what we call at the edge.”

Scroggie says the need for larger data storage centres also has been driven by an increase in the ‘density of computing’ over the past decade.

“Today we have 10 times more computing available to us as consumers and that’s a very significant shift in computational capacity,” he says.

“In the past, the average computing rack in a data centre might have had one to two kilowatts. Today, they are between eight and 10 kilowatts and that means a very significant increase in the amount of computing capacity and the amount of power that is required to drive all of our data-driven lives. These become critical in managing our data lifecycles.”

NEXTDC’s investment in growing its data centre network was supported by an 18 per cent increase in revenue from its existing centres to $291 million in FY22. This helped drive underlying EBITDA 26 per cent higher to $34.5 million and deliver a bottom-line profit of $9.1 million.

NEXTDC grew customer numbers grew by 106, or 7 per cent, to 1,613 in FY22, while interconnections rose by 1,895, or 13 per cent, to 16,613.

Scroggie says demand for hybrid cloud and connectivity is being driven by customers bolstering their resilience planning and elevating their focus on security and sovereignty challenges.

And while data centres have become an asset class that is appealing to alternative asset investors, NEXTDC is not a seller due to its commitment to sovereign data and security.

“At the very beginning, 12 years ago when we started the company, we needed to sell the underlying buildings and lease them back because it was a very young business that didn’t have significant capital,” says Scroggie.

“Now we are an owner of the land and building and a builder of data centres because we can afford to do both. Today it’s important to own the land and building to control the security and operational resilience of the sites. We are what the federal government refers to as sovereign secured.”