Goodman $1.2b Data Centre Withdrawal|Near-Home Ban Risk to Pipeline?

One bad site, or a new rule?

Goodman Group has scrapped Project Mars, its $1.2 billion data centre plan in Sydney's Lane Cove, after fierce local opposition. Goodman blamed changing government policy, not just the neighbours, and data centres are most of what it is building. Project Mars would have stood about 20 metres from the nearest home. Earlier that month, a federal consultation paper floated banning data centres close to homes or schools.

The first fact is about one building. The second could apply to large data centres across the country. Australia's biggest listed property company gave up on a project that drew 374 public submissions. Nine were in favour. Nor was it a giant by industry standards. Project Mars was smaller than many other proposed data centres in New South Wales.

It was a 90 megawatt facility at the very edge of an industrial zone, backing onto bushland and homes. Data centres were not new to the area. Three others already exist in, or are proposed for, Lane Cove West. What set this one apart was how close it sat. Lane Cove West Public School was about 160 metres away. Utilities joined the objections.

Sydney Water and Ausgrid both raised concerns that the project would strain existing infrastructure. Ausgrid asked for due consideration of "risks of electrocution, fire risks". Goodman itself estimated the facility would need about 1.4 million litres of drinking water a day for cooling. The school's Parents and Citizens Association wrote that the project "poses substantial and unmitigated risk to our children".

Read this way, Lane Cove was one badly placed building. Losing it would be a local setback, not a strategic one.

Why walk away so fast

The timing does not fit that reading. At a Senate inquiry the week before, Goodman said it would decide by the end of 2026 whether to proceed. Its representatives suggested "some form of design change" might come, given "a difference of opinion" with the community. Capital Brief reported Goodman had hoped the project's economic benefits would win residents over. Failing that, a community grants program might.

Less than a week after that hearing, the application was withdrawn. It was the first hearing of the Senate committee on AI and data centres, held in Lane Cove itself. Liberal senator Sarah Henderson called building so close to homes "completely unacceptable". She said it showed "contempt for local residents." Goodman's general manager of development, Ben McGlip, did not claim local support.

"I'm not suggesting we've reached, we have social license on that," he said. He added that "in that particular example at Lane Cove, I think we've got work to do." Work to do implies time to do it. Neither voice at that hearing mentioned the rulebook. Goodman's letter, days later, led with it. The letter came from Goodman's head of planning, Guy Smith, to the New South Wales planning department.

"Having considered emerging federal and state policy, Goodman has concluded that it will not progress with the development application." Goodman said the policy and regulatory environment had "evolved significantly" since planning began in March 2025. Community views are in the statement too. But Goodman says it weighed them "together with" those policy changes. The federal policy is still at consultation stage.

The Department of Prime Minister and Cabinet has outlined minimum standards on where large data centres can go. Under them, data centres could be banned close to homes or schools. States and territories keep control of planning approvals, and can impose even higher standards. The paper says large data centres cannot be built "without meaningful engagement with the communities in which they are located".

Victoria has already proposed banning data centres in residential areas and near schools. Project Mars had a house about 20 metres away. It had a school about 160 metres away. That is the exact profile these rules describe.

How much rides on the reason

That moves the question from one building to the pipeline. The AFR noted data centres make up close to 80 per cent of Goodman's work in progress. It put that work in progress at nearly $20 billion. That puts Goodman's data centre work at roughly $16 billion. Project Mars, at $1.2 billion, was less than a tenth of it. So the money lost at Lane Cove is modest. The reason given for losing it is not.

Goodman shares fell as much as 2.1 per cent in early trade the next morning. A Motley Fool writer had argued days earlier that Goodman's valuation looks reasonable if its data centre expansion succeeds. Goodman was not the only one naming regulation. Data Centres Australia, the industry's peak body, also cited the emerging regulatory environment as a blocker to investment.

Its chief executive, Belinda Dennett, tied the outlook to certainty on where policies and regulations land. Until then, she said, it is likely "we will see more customers, investors and developers adopt a wait and see approach". NextDC's chief executive, Craig Scroggie, has warned that regulatory uncertainty is raising the cost of development.

Project Mars is the third data centre proposal withdrawn in Australia in five months. Community campaigns sank a $600 million project in Perth's Hazelmere in May, and one in Katoomba in June. The Katoomba project was worth $4.8 million. Goodman's was $1.2 billion. Capital Brief's analysis says Lane Cove could be the first of many developers withdrawing or revising their applications.

That is a possibility the analysis raises, not a trend it has measured.

Where the line falls

Not every developer is retreating. AirTrunk is actively scaling up its planned 1.2 gigawatt campus at Kemps Creek, despite similar community backlash. Sydney alone has 41 state-significant data centre projects in the pipeline. Eighteen are already approved. Victoria's proposed rules also carry an exception. They would not apply to existing data centres, or to those already being assessed for approval.

The state opposition called the plan "irrelevant" as a result. Lane Cove's state MP, Anthony Roberts, drew one lesson. "This victory sends a clear message to other data centre developers," he said. That message, in his words, was "to find suitable locations before putting proposals forward." Belinda Dennett has warned of a different message, aimed at investors.

"If we slow the data centre market down and wait for renewable energy, we will lose that investment, it will go elsewhere." She named Malaysia, Singapore, Japan and India. Roberts also said "data centres have an important role to play". So neither side is arguing against building them. The disagreement is over where they may stand, and how fast the rules settle.

Goodman walked away from a site 20 metres from a home, citing policy that could ban building that close. Lane Cove reads less as a verdict on data centres than as an early test of where they may stand. The thing to watch is the final federal minimum standard on location, and any tougher New South Wales version.

If it sets wide distances from homes and schools, and spares no project already in the pipeline, more sites near housing could follow Lane Cove. Then developers with suburban sites, and their shareholders, carry that risk. If the distances are narrow, or pending projects are exempt as in Victoria, Lane Cove stays one badly placed building.

Informational only, not investment advice. Figures and quotes come from the linked reports.