Unlocking the potential: New Zealand’s data centre industry

As the digital economy accelerates, the global race to build next-generation data infrastructure is intensifying, particularly in the data centre sector. Global demand is being driven by the rapid expansion of cloud computing, artificial intelligence (AI), and digital services.

While established markets such as North America, the UK and Europe continue to grow, they are increasingly constrained by limited space, rising costs, and infrastructure bottlenecks. As a result, investors are turning to emerging markets for scalable, sustainable alternatives. New Zealand is quickly gaining traction as one of these promising alternatives. With an impressively high proportion of renewable electricity, improving international connectivity, a stable regulatory environment and a banking sector that is showing increasing interest in financing infrastructure, it presents a compelling opportunity for forward-looking digital infrastructure investment.

With the New Zealand Government recently declaring that “New Zealand is open for business”, now is a compelling time for investment opportunities in New Zealand.

Global context: A market under pressure

In traditional data centre hubs, growth is beginning to outpace capacity. North America’s data centre sector expanded by 40% year-over-year as of Q1 2025 [1]. Europe faces record-low vacancy rates, and the UK is on track to nearly double its capacity by 2028 [2]. The UK Government has even designated data centres as critical national infrastructure, streamlining planning laws to attract further investment.

However, this rapid expansion is not without challenges. Power shortages, grid congestion, land scarcity, and skilled labour constraints are inflating costs and delaying delivery timelines. These pressures are prompting global investors to diversify into markets with fewer constraints and greater long-term potential.

By contrast, New Zealand presents a fresh alternative. It combines digital maturity with environmental sustainability and room to scale. The country’s data centre market is projected to generate over USD1.37 billion in revenue in 2025, with a compound annual growth rate of 5.23% through to 2029 [3].

Key investment drivers and considerations in New Zealand

Power and natural cooling

New Zealand generates approximately 85% of its electricity from renewable sources, primarily hydro, wind, geothermal, and to a lesser extent but with several new projects in development, solar [4]. This low-carbon grid aligns with global ESG mandates and offers a strong foundation for green data centre development. New Zealand’s temperate climate (particularly in the South Island) also provides a natural cooling advantage, reducing reliance on energy-intensive mechanical systems [5] and improving power usage effectiveness (PUE).

However, as demand grows, so will pressure on the national grid. Large developments may require direct-to-grid connections, and early engagement with local lines companies is essential. There is also a growing interest in long-term Corporate Power Purchase Agreements (CPPAs) with generators to hedge against electricity price volatility - an emerging trend among hyperscale operators in New Zealand [6].

Latency and connectivity

New Zealand’s geographic isolation is being mitigated by major investments in submarine cable infrastructure [7]. Projects like the Southern Cross NEXT, Hawaiiki, and the proposed Tasman Ring Network are looking to enhance international bandwidth and reducing latency, which is critical for AI-ready infrastructure and real-time applications.

However, reliance on a limited number of cables introduces transmission risk. A single cable failure could disrupt services, highlighting the need for resilient and diversified routing. While Auckland is relatively well-connected, regions like Otago and Southland that are attractive for their natural cooling and proximity to renewable energy sources, require further investment in fibre backhaul and network resilience. This is particularly relevant as these areas are attracting large-scale data centre projects, such as the proposed NZD2 billion Datagrid facility in Invercargill [8].

Data protection and sovereignty

New Zealand’s robust data sovereignty framework, underpinned by the Privacy Act 2020 and GDPR adequacy [9], makes it a compelling jurisdiction for onshore data hosting, particularly for Government and regulated sectors.

Major cloud providers such as Microsoft and AWS are responding to growing demand for data residency and sovereignty by launching local data centres [10]. This enables organisations to store and process data onshore, reducing exposure to foreign jurisdictional risks and aligning with local compliance requirements.

Data sovereignty in New Zealand is not just a legal or technical issue, it is also culturally significant. For Māori, data is not merely a commodity but a taonga (treasure), and data sovereignty is an emerging priority. Investors and operators must engage meaningfully with iwi and hapū to ensure that data infrastructure development respects Indigenous rights and aspirations. This includes co-designing Governance models and ensuring Māori benefit from digital infrastructure development.

Regulatory reform

New Zealand’s 2025 Budget and the Infrastructure Investment Summit held in March 2025 signalled a strong commitment to unlocking economic growth through infrastructure development and regulatory reform. Two key legislative frameworks are particularly relevant:

Resource Management Act 1991 (RMA): The Government plans to replace the RMA with the Natural Environment Act and the Planning Act [11]. These Acts aim to (among other things) streamline consenting processes and reduce costs and delays. For data centre developers, this could significantly reduce the complexity and timeframes associated with securing land use and environmental consents. However, the current RMA framework, and its challenges (such as local council variability and lengthy assessments), remain in place until mid-2026.
Overseas Investment Act 2005 (OIA): The OIA is the primary legislation governing foreign investment in sensitive assets, including land and infrastructure. Reforms announced in detail in early 2025 aim to attract high-quality overseas investment while maintaining national interest protections. To the extent the data centre site is not being built on farm land, our experience with recent transactions has been that the Overseas Investment Office is willing to facilitate data centre transactions without significant consent requirements.

Financing considerations

In recent years New Zealand’s banking sector has shown increasing interest in financing infrastructure. The recent Infrastructure Investment Summit reinforces this focus. Within this context, digital infrastructure, including data centres, has the potential to emerge as a compelling opportunity and a highly attractive asset class.

Lenders active in financing energy projects, utilities and horizontal and vertical infrastructure are already familiar with the long-term, contracted cashflows and essential service characteristics that quality data centres can offer. In a market where traditional project financing pipelines remain relatively narrow, lenders are seeking scalable, capital-intensive opportunities underpinned by strong demand fundamentals. Data centres fit that profile.

Data centres also align with banks’ broader investment objectives, such as digital transformation, sustainability and energy transition. Given this, data centres have strong potential to attract both domestic and international debt capital, and investors may be able to leverage operational decarbonisation or access to renewable energy to enhance financing economics.

Conclusion

New Zealand is on the cusp of a digital infrastructure transformation. While challenges remain, the fundamentals are strong: with its renewable energy advantage, improving connectivity, strong regulatory foundations, and growing focus on operational innovation, it offers a compelling alternative to saturated global markets.

For investors, developers, and technology providers, the message is clear: New Zealand is not just open for business - it’s ready for the future.

MinterEllisonRuddWatts has advised, and is currently advising, on some of New Zealand’s most significant data centre matters, including the proposed Datagrid hyperscale development and the Tasman Ring Network, DCI’s national rollout, and strategic procurement and regulatory matters for major banks. We also bring global perspective, with members of our team having advised large international data centre platforms.