(AUSTRALIAN RED TAPE IS A REAL SPOILER FOR FOREIGN DATA CENTRE OPERATORS)
June 5, 2024
Hello everyone,
Established data centre operators in Australia have an economic moat. Red tape appears to be preventing foreign data centre owners from operating in Australia.
There is a growing appetite for more data storage and management, which is being pushed along by the AI technology revolution. Morgan Stanley points to the fact that Australian companies such as Goodman Group and NextDC have a special home advantage. They are potentially better positioned because they have significant, well-established land banks that hold large value.
Analysts at Morgan Stanley point to the challenging issues global competitors are encountering. Difficulties with working with local councils and utilities are stalling progress, and then there is the cost of development approvals and so on.
That advantage for existing Australian companies will provide attractive opportunities. Morgan Stanley expects data centre operators – the sector as a whole – to grow at a compound annual growth rate of 13% out to 2030.
It’s all good news for Goodman. Analysts at Morgan Stanley see the market pricing in a data centre pipeline of $9 billion, but it puts that figure at more like $20 billion.
Goodman also has significant flexibility with the land bank, where it can sell with approvals or develop the land to client specifications. Land that is developed into data centres is valued at a significant premium to that of typical industrial use, providing an attractive return-on-investment option should the company not want to hold the land long-term.
NextDC has a similar narrative to Goodman, with recent contracts confirmed and international expansion in the pipeline.
This sector has growth written all over it.
(This is an article of interest, not a recommendation to purchase Goodman Group or Next DC).
Natural disasters are a real threat to a large percentage of Australian properties.
Consider this scenario. You have finally purchased your home. And for a while, all is well in your world. Then a natural disaster strikes. Suddenly, everything is not so rosy anymore. Are you insured? If you are insured, will the insurance company cover all costs?
In Australia, many properties are at risk of being severely damaged or lost to a natural disaster. And what makes the situation even worse is the fact that premiums are so high that many have chosen not to insure. On top of that, in some areas that have a high flood risk, insurers may be unlikely to insure your property anyway.
Research shows that half of all Australian homes are at risk of natural disasters. 5.6 million properties are at risk of bushfires, almost 1 million are at risk of floods and thousands more are threatened by coastal erosion.
The NSW suburb of Ballina has the highest flood risk in the country. Victoria’s Upper Yarra Valley has the highest bushfire risk and Queensland’s Surfers Paradise has the biggest coastal erosion threat.
From my research, it seems many Australians are unaware of the dangers and have become very complacent.
QI CORNER
Cheers,
Jacquie