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Dear Readers,

Here is something you rarely see these days.

Some actual figures and evidence of how the world’s biggest operators of data centers are directly contributing to a worldwide trend.

By driving the value of land out on the margins of those big cities much, much higher.
Source – Australian Financial Review.

According to available records and industry experts, companies such as Amazon and Microsoft have been paying double the market rate for land suitable for their data centres. That’s because of the need for a “availability zone” to even build them. More on that soon.

That’s why I am bringing this news to you today.

It’s inevitable that when we speak about the real estate cycle, and about how to correctly track it as it turns, that what’s going on with commercial land becomes critical as we get closer to the US land market peak.

And today you’ll discover why.

Here is a quote from the above article:

The race for space is expected to intensify with the number of Australia’s data centres likely to more than double by 2030, according to a Moody’s report released on Wednesday.

Australia constitutes the third-largest data centre market in the Asia-Pacific region already, with the second-highest cloud-computing adoption rates, it said. Data demand is rising at more than 10 per cent annually, with hyperscale’s such as Amazon, Microsoft and Google committing more than $25 billion towards their computing capacity here.

It is the mad scramble by the biggest names in this space to secure suitable land that enables the groundwork for the particular vision companies like Amazon and co have for their AI-enabled future.

And frankly, this trend occurring in countries like the US, the UK, Germany, China – virtually everywhere in fact.

But this is the defining moment now for this particular cycle. It is the race to secure the best locations for these data centers that has completely upended the commercial space.

Which means that if you have any interest in understanding the timing of the 18.6-year cycle and knowing where we are in it, this is a trend you simply must be across and following.

This year in Australia alone, there have been over A$2.5 billion worth of deals done. That’s serious money for this market. But it is also doing something else.

By outbidding any other traditional industrial company for this land, it is dislocating the market.

And forcing those same companies to move further out from the best locations.

Rinse and repeat.

One can actually see now just how these massive data centre operators are staking out huge tracts of land further and further out as time goes on. Again, the assumption here is that the details provided in the article are accurate.

In one Melbourne deal which settled at the end of last year, Amazon paid $71.2 million for a 12-hectare property – nearly $600 a square metre – in an undeveloped section of Craigieburn, in the city’s north. Industrial land typically sells for no more than $300 a square metre, market sources said.
Source – hume.vic.gov
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Craigieburn is approximately 24 kilometers from the centre of Melbourne.

Interestingly, this Amazon property is close to a 41-hectare land parcel Frasers Property Industrial bought from Cadence Property Group in 2023 for $87 million – at just $212 a square metre.

Note the difference per square metre here in just 12 months. Somewhat closer still is Tullamarine. Microsoft purchased a 6.55-hectare property in Tullamarine, in the city’s north-west for $60.5 million in October 2021. Microsoft paid over $900 per square foot for it.

Land value at the time was priced at around $450 per square metre.

The cost is higher the closer you are to the city centre. Necessitating those same companies to focus further away to find suitable acreage. This is a hallmark of late-stage real estate cycle behavior.

Here is a further detail on the type of land these data centres require.

Gavin Bishop, industrial and logistics managing director at Colliers (a property company), said an industrial property needs adequate power supply and water access as well as being in a so-called “availability zone” (an area where there is a grouping of one or more separate data centres) for a facility to be built on the land.

“If it ticks all those boxes, and power being predominantly the main one, then absolutely, data centres can pay more than industrial developers can pay for the land. So, it does increase the value of land,” Bishop told The Australian Financial Review.

Wow – who’d have expected that?

A self-fulfilling prophecy of overbidding for land, and yet by their very nature causing a revaluation of the land that justifies the overpay. This is how the cycle repeats.

This is why you must start to watch how this trend develops. Across all the major cities in the country where you reside. It’s also a great reason why you should become our latest Boom Bust Bulletin (BBB) member.

Use the BBB to change the way you view the world around you. The final hurrah for this cycle will involve overbidding on the most marginal of sites.

What that means for you, and when it happens, is what the BBB teaches you.

Do not be left behind. Get the education you and your family need to profit and then protect yourself this cycle.

Soon, one of these AI-centric giants is going to make history. Paying a world record amount to secure one of these sites.

It will be BBB readers who appreciate the timing behind it, and what it means for them.

So, sign up now.
Best wishes,
Darren J Wilson
and your Property Sharemarket Economics Team

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This content is not personal or general advice. If you are in doubt as to how to apply or even should be applying the content in this document to your own personal situation, we recommend you seek professional financial advice. Feel free to forward this email to any other person whom you think should read it.