Commercial Property Foreign Investment: Main Considerations for Australian Data Centre Site Selection

Data centres represent a specialised segment of commercial property foreign investment in Australia. As the demand for cloud storage and artificial intelligence increases, overseas entities are looking to the Australian market for development opportunities. Selecting a site for a data centre involves more than just finding a large plot of land. It requires a detailed understanding of the Foreign Acquisitions and Takeovers Act 1975 and how the Foreign Investment Review Board (FIRB) views these assets.

The Regulatory Environment for Data Centres

The Australian government treats data centres as sensitive infrastructure. The Foreign Investment Reform (Protecting Australia's National Security) Act 2020 introduced stricter oversight for assets that involve national security. Data centres often fall under this definition because they store sensitive data for government agencies, financial institutions, or telecommunications providers. This means that a foreign person or corporation may need approval regardless of the value of the land. It is important to distinguish between a temporary resident and a non-resident foreign person. While both are considered 'foreign persons' under the Act, temporary residents have specific obligations or exemptions that differ from non-resident foreign investors.

When we provide FIRB application services, we first identify if the target property is "national security land." If it is, the usual monetary thresholds do not apply. Every dollar spent requires a formal application. This differs from standard commercial land. For developed commercial land, the threshold is more than $347 million for investors not from an agreement country, and more than $1,498 million for private investors from certain free trade agreement partners, current from 1 January 2026. A built data centre is generally sensitive developed commercial land, because the regulation treats land fitted out for bulk data storage as sensitive, so the threshold that usually applies is more than $75 million. Understanding these distinctions early prevents delays in the acquisition process.

Commercial Property Foreign Investment Categories

In Australian law, land is often categorised as either residential, commercial, or agricultural. Data centres are built on commercial land, but the sub-category matters. FIRB distinguishes between vacant commercial land and developed commercial land. According to Guidance Note 4, vacant commercial land always requires approval. Developed commercial land may be exempt if the value is below the threshold and it is not considered sensitive.

For a data centre project, the land is usually vacant or contains older industrial buildings intended for demolition. In these cases, FIRB typically attaches conditions to the approval. These conditions often require the investor to start construction within a specific timeframe, such as five years, and not to sell the land until construction is finished. We assist clients in reviewing these conditions to ensure they align with the project timeline.

Power and Utility Requirements

A data centre cannot function without a massive and reliable power supply. Site selection must focus on proximity to high-voltage transmission lines and substations. In Australia, the energy market is regulated at both federal and state levels. Securing a connection agreement with a provider like Ausgrid in New South Wales or United Energy in Victoria is a separate process from the land purchase, but the two must happen together.

Water is also a factor for cooling systems. Investors must check local council regulations regarding water usage and wastewater disposal. If a site lacks the necessary utility connections, the cost of bringing those services to the boundary can make the project unviable. Due diligence should include a technical assessment of the local grid capacity before committing to a purchase contract.

Zoning and Local Government Planning

Each state and territory in Australia has its own planning laws. For example, in New South Wales, land is zoned under Local Environmental Plans (LEPs). A data centre is generally classified as "high technology industry" or "light industry." It is necessary to ensure the specific zone allows for 24-hour operation and the high level of security fencing required for such facilities.

Some industrial zones in Sydney and Melbourne are being rezoned for residential use to meet housing demand. This creates a risk for data centre developers. If a site is near a future residential area, noise complaints regarding cooling fans could lead to operational restrictions. We work with town planners to review the long-term strategy for the area to ensure the site remains suitable for industrial use.

National Security and Data Sovereignty

The Australian government has a clear interest in who owns and operates the facilities that store the nation's data. FIRB may consult with the Australian Signals Directorate (ASD) during the application process. They look at the "character of the investor." If the investor has ties to a foreign government that Australia considers a risk, the application may face more scrutiny.

Conditions may be imposed on the corporate structure of the entity buying the land. For instance, FIRB might require that the data centre manager is an Australian citizen or that certain data remains on Australian soil. These requirements can affect the cost of running the facility. According to RBA research, foreign demand for commercial buildings remains strong, but the regulatory hurdles for sensitive assets are higher than for standard office blocks.

FIRB Fees and Application Timelines

Foreign investors must pay an application fee before FIRB will begin reviewing the case. For commercial acquisitions, including data centres, the fee is paid through the Foreign Investment Portal, which Treasury administers; the Australian Taxation Office (ATO) administers residential applications. These fees are indexed annually on 1 July. For a standard commercial application where the property value is $50 million or less, the current fee is $15,100 for the 2025-26 financial year. For higher-value acquisitions, these fees can increase significantly. It is a non-refundable cost, so the site selection must be firm before the application is lodged.

The statutory deadline for a FIRB decision is 30 days, but the Treasurer can extend this by another 90 days. For data centres, expect a longer wait. The consultation with other government departments takes time. We recommend that investors include a "subject to FIRB approval" clause in their purchase contracts with a minimum of 60 to 90 days for the approval period.

Taxation and Financial Considerations

The financial structure of the acquisition is as important as the physical site. Australia has strict thin capitalisation rules that limit how much interest a foreign entity can deduct against Australian income. Also, state-based land tax and surcharge land tax apply to foreign owners. In some states, the foreign owner surcharge applies to commercial land. Victoria applies a 4 per cent absentee owner surcharge to all land, and Queensland applies 3 per cent. New South Wales increased its surcharge to 5 per cent from the 2025 land tax year, but the New South Wales surcharge applies only to residential land and does not apply to a data centre site.

The OECD economic survey has previously discussed how tax reforms might affect foreign investment. Investors should seek advice from tax and immigration specialists to understand the "all-in" cost of holding land in Australia. This includes the annual land tax, the FIRB fees, and potential stamp duty surcharges.

Regional Market Comparison

Sydney remains the primary hub for data centres due to its proximity to the main subsea cable landings and the headquarters of major banks. However, land prices in Western Sydney have increased. Melbourne is the second largest market, offering more affordable land in industrial corridors like Derrimut and Truganina. Brisbane is growing as a secondary hub, providing redundancy for Sydney-based operations.

Regional areas are also being considered for "edge" data centres. These smaller facilities bring data closer to the end-user. While land is cheaper in regional Australia, the connectivity to the fibre backbone is often more expensive. Investors must balance the lower land cost against the higher infrastructure spend.

How We Assist Foreign Investors

Our firm is experienced in helping overseas buyers manage the legal requirements of the Australian property market. We handle the FIRB application from start to finish. This includes drafting the submission, communicating with Treasury through the Foreign Investment Portal, and advising on the conditions of approval. We also work with commercial property law lawyers to manage the conveyance and the review of the purchase contract.

For developers who are building large-scale projects, we can advise on exemption certificates. These certificates allow a developer to buy multiple sites within a certain area without needing a separate FIRB application for each one. This provides more flexibility during the site selection phase. If you are also looking at residential components, you may find our luxury off-the-plan guide helpful for understanding how residential rules differ from commercial ones.

Data centre site selection is a technical and legal process. By identifying the right land and managing the FIRB requirements early, foreign investors can secure a strong foundation for their Australian operations. We provide the practical advice needed to move from an initial site review to a successful acquisition.

This information is general in nature and FIRB rules change frequently. Contact us for advice specific to your situation.