Data Centres – A Planning Perspective
Words — Natasha Campbell, Senior Town Planner & Ben Cooke, Principal Town Planner – prepared for VPELA Revue Autumn 26
Images — Next DC – M3Melbourne DC
(Source: https://www.hdrinc.com/au/portfolio/m3-melbourne-data-centre)
Category — Insights
Against a global backdrop of rapid tech and AI evolution, data centres are increasingly a subject of public discourse. The ‘cloud’ is not in the air, but rather a very real, physical entity – consuming energy, water and space in our cities and suburbs.
Our planning team recently prepared this article for VPELA Revue, exploring the planning complexities and exciting opportunities this new tech frontier presents.
The new infrastructure frontier
Historically, water reservoirs were built to secure supply for a growing city population, electricity cables were laid out across our suburbs, improving comfort levels and living standards for many, and telecommunication antennas have been retrofitted to prominent buildings to enable phone reception and internet connectivity. In a not-so-dissimilar fashion, the explosion of Data Centres (DCs), identified by the Australian Government as nationally critical infrastructure (1), is emerging as the most strategically significant form of contemporary urban infrastructure of our time.
DCs are specialised facilities that store, process and distribute digital information, acting as the physical backbone of cloud computing, AI, e‑commerce, telecommunications and effectively every digital service that we rely on.
Planning for the digital age
For planning practitioners, DCs present both strategic opportunities and complex challenges. As an industry, admittedly, we’re navigating what is still a relatively new land use and development typology. The pace of project delivery, scale of infrastructure and supporting utilities (power and water), unparalleled flow of global capital, approval pressures, as well as the long-term implications for our cities require careful interrogation and advocacy.
In contrast to other development outcomes, such as medium-density housing or high-street retail stores – which are typically conceived and delivered at local scale – DCs operate in a hyper-globalised economy. Project decisions are influenced by global trends and multinational technology companies, yet the ‘real life’ planning and community impacts remain local in their manifestation.
At their core, DCs are highly engineered facilities. Their masterplanning and siting requirements are specific and largely non-negotiable. Key site characteristics include the need for large (and ideally regular) sites to accommodate substantial floorplates and capacity to manage logical placement of on-site infrastructure, including substations, plant and generators. Access and circulation for heavy vehicles is required to allow for skid delivery, plant replacement, and speedy construction methods. Integrally, proximity to reliable power supply, access to water, and permissible planning controls are the primary drivers of site-specific selection.
Keeping up with Data Centres
Until recently, a ‘Data Centre’ was not a listed land use term within the Victorian Planning Provisions. Amendment VC159 (gazetted 2019), introduced the term ‘Data centre’ with no formal definition; its categorisation remaining a ‘Utility Installation’. From a statutory planning perspective, DCs are broadly permissible across industrial (INZ1, INZ3) and commercial (C2Z) zones, with some also approved in Mixed Use Zone (MUZ) localities. The conventional Council planning permit approval pathway is available, however, as of September 2023, there’s also the ability to pursue approval under the State Government Clause 53.22 – Significant Economic Development pathway, provided the project meets the relevant economic thresholds (which undeniably, is the case for all Data Centre propositions).
So, where do they go?
DCs are typically located within brownfield or greenfield contexts, particularly within existing or proposed industrial precincts with strong alignment with MICLUP State and Regional designations. In metropolitan Melbourne, this is especially evident in the western and northern growth areas, where larger parcels of land are available, power and water infrastructure is accessible and applied industrial and commercial zoning provides an aligned land use and development setting.
Key planning considerations when considering projects include (inter alia):
- Amenity considerations – these often centre on acoustic impacts, particularly relating to noise emitting from plant equipment (chillers, MEPs, generators, etc.). This is more relevant when a DC has a proximate interface to sensitive uses.
- Engineering – as highly specialised facilities, this plays a pivotal role in understanding site capacity, physical limitations and the ultimate architectural proposition.
- Physical security – this is an essential requirement for DC clients (perimeter fencing, secure vehicle entry, etc.), which in turn, can make it challenging to achieve desired urban design and meaningful landscape outcomes.
A global challenge
There has been significant media attention regarding the surge in DC developments across Melbourne, and more broadly, Australia. Energy consumption, water use and land demand are regularly discussed and debated. Internationally, governments are grappling with similar concerns. The Netherlands, Ireland and Singapore (2) have implemented moratoriums in recent years which have resulted in restrictions or pause on new DC developments; primarily driven by energy grid constraints, sustainability concerns and limited land availability. These examples raise important questions for planning and DC delivery in Victoria, including:
- Should the State Government be more prescriptive about preferred DC locations and/or built form expectations?
- Should there be stronger policy guidance to facilitate co-location of DCs proximate to existing or planned major power generation, transmission and water infrastructure?
- How can coordination with power and water authorities be improved in a planning approval process?
- Should a holistic package of DC planning objectives/principles be developed (such as a Guidance Note or Practice Note or similar).
- Should sustainability assessments be more nuanced and specific to DCs?
- How do we plan for adaptive reuse, given the highly specialised nature of these facilities?
New expectations
As of March 2026, the Federal Government released a set of ‘expectations’ for data centre and AI infrastructure developers (3). The expectations aim to incentivise investment consistent with our national interests and ensure the benefits of AI are shared by the Australian people.
The expectations are focused on the following subject matter:
- Prioritising Australia’s national interest.
- Supporting Australia’s energy transition.
- Sustainable and efficient water usage.
- Investment in Australian skills and workforce.
- Research, innovation and local capability.
At the time of writing, its not clear how these high-level expectations will be interpreted and used to guide State and local government statutory assessment processes, other than the following description: ‘The government will also work with states and territories and market participants to implement the expectations in their processes, particularly through the Energy and Climate Change Ministerial Council’.
The data-driven future ahead
The speed and scale of DC infrastructure – and the rapid evolution of the technologies they support – present an exciting strategic and statutory environment for planning practitioners to work. There’s an opportunity to learn in a fast-evolving industry, to facilitate appropriately located and well-designed outcomes and advocate for continued interrogation of improved processes and outcomes. We, like many, eagerly await what comes next.
To find our more about data centres, or to discuss your planning strategy or proposal, please reach out to our Planning team.
References:
(1) Australian Government, Trade and Investment Commission (https://international.austrade.gov.au/en/do-business-with-australia/sectors/technology/ai-and-data-centres).
(2) Tech Monitor, Inside the Data Centre Moratorium Movement (https://www.techmonitor.ai/hardware/cloud/inside-the-data-centre-moratorium-movement?).
(3) Expectations of data centres and AI infrastructure developers (https://www.industry.gov.au/publications/expectations-data-centres-and-ai-infrastructure-developers)
