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While the largest hyperscale developments are being funded through institutional and infrastructure capital, a growing number of smaller projects are creating opportunities in the mid-market, where industrial owners are exploring whether their sites can support data-centre developments.
The scale of the opportunity is significant, with Commonwealth Bank of Australia (CBA) estimating Australia’s data centre build-out could reach $155 billion by 2030. Australia is also now the world's third-largest destination for data centre investment, according to credit reporting bureau CreditorWatch.
CBA has also estimated data centres will add around six percentage points to real business investment growth in 2026 and around five percentage points in 2027, while contributing around 0.2 percentage points to real GDP growth in both years.
The data centres themselves will also contribute to the ongoing push to integrate AI into lending, with lenders investing billions into their own AI capabilities.
Two markets emerge
The scale of the expansion is also being reflected in the amount of debt flowing into the sector. According to an analyst note from the Reserve Bank of Australia, debt accounted for roughly 85 per cent of new funding obtained by data centre operators in 2026 so far.
That same note found that Australian data centres operators have raised capital of at least $35 billion this year, more than seven times the annual average between 2020 and 2024.
According to Alasdair King, principal of commercial brokerage Glencair Financial, two distinct markets have emerged within the data centre sector, with his brokerage increasingly involved in the financing of one.
“There are two markets for datacentres at present: Hyperscale campuses - hundreds of megawatts, billion-dollar tickets - these are all run through infrastructure desks at banks and listed operators, not a standard broker panel,” he explained.
“What hits our desk is powered land, 10–40 MW shells, industrial owners, who are testing for a data-centre site. Those calls have gone from occasional to weekly.”
King said the challenge for these projects was not necessarily securing the land itself, but establishing whether the underlying infrastructure and commercial arrangements could support the proposed development.
“Capital and land move fast (ish). Grid connection does not move fast. Uncontracted megawatts are still the real constraint for a lot of these opportunities.”
The difference means data centres require a fundamentally different approach to financing than conventional industrial property, he said.
“A warehouse is land, building and a lease. A data centre is that plus power, water, fibre, specialist construction and an offtake that may not look like a CRE lease.
“Lenders must underwrite the connection agreement, who pays for grid augmentation, tenant concentration, and whether rent starts on completion or energisation - that's all on the negotiation and who your client is partnering with.”
Power before property
These additional considerations can make financing a data centre considerably more complex than a conventional industrial project, with King saying that power and the certainty of the project's delivery are the starting point for any lender.
“Power and connection first, then delivery, then whether the customer is real,” he said.
“Comfort comes from a credible energisation path, contracted capacity with a creditworthy name, a sponsor or contractor who has delivered a hall, and a structure that survives delay.”
Without those elements, King said projects could quickly become unfinanceable.
“Files die on hopeful zoning, no firm megawatts, and 65 per cent LVR on a residual that assumes 2028 rents. AI demand is not security. A contract is.”
Where brokers fit
While the largest hyperscale projects remain outside the traditional broker market, King said the mid-market presented an emerging opportunity for commercial brokers able to access a broader range of specialist lenders.
“Mid-market land, first-stage halls and construction-to-offtake come from selective majors, international banks, infrastructure lenders and private credit - all based on three main features, being sponsor risk, site risk and construction risk.
“Private credit is often first on speed and construction risk. Brokers matter on those mid-ticket files if they can run a tender beyond an industrial panel.”
That opportunity is likely to grow as more projects move from land acquisition into construction and completed facilities require refinancing, although King said data centre finance was unlikely to develop into a high-volume lending market.
“The debt market will grow for a few years yet - land, construction, refinance of completed halls. It will not become an industrial-style volume. Credit committees, diligence and the lender set are different and case by case.”
Data centre boom hits pipeline under strain
While the data centre boom could have material impacts for the broking industry and Australia’s economic growth more widely, it is landing on a construction industry already operating under significant credit pressure.
NSW and Victoria account for around 91 per cent of the future pipeline, according to CBA, concentrating much of the demand for land, labour and specialist construction services in two of the country’s largest construction markets.
CreditorWatch’s August Business Risk Index showed construction carrying a 60-plus-day payment arrears rate of 6.5 per cent, the fourth highest of the 18 industries tracked, with arrears rising 13.3 per cent over the year.
The pressure has also been reflected in insolvencies, with construction first-time insolvencies rising to 868 in August, compared with around 300 a month through much of the previous year.
CreditorWatch added that much of the sector’s credit stress is concentrated in residential building.
Construction also recorded a trade-payment default rate of 1.94 per cent and an ATO tax-default rate of 1.58 per cent, ranking it third and second respectively across the industries tracked.
CreditorWatch CEO Patrick Coghlan said the construction sector was increasingly operating across two distinct markets.
“A $150 billion pipeline is being poured into a construction sector that's already seeing credit pressures running at two speeds,” Coghlan said.
“The commercial firms geared to data centre work are looking at years of high-value activity, but the residential end is still absorbing rising defaults, tight cash flow and higher input costs.”
He said the key issue would be whether the industry had enough capacity to meet the additional demand.
“The risk is that this boom draws skilled labour and materials away from housing and essential infrastructure at exactly the time we can least afford it.
“Australia doesn't have a shortage of demand for construction - it has a shortage of capacity to deliver it. That's the real test the numbers are pointing to.”
[Related: AI adoption is surging, but are lenders’ data systems ready?]
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