Macquarie Technology Group (ASX:MAQ) may face community pushback as it exercises option to buy a major data center development site in Sydney, New South Wales, for AU$240 million, Jefferies said in a Wednesday note.

The company plans to build an engineering and technology campus co-located within an around 200 megawatts data center campus in Macquarie Park, designed to incorporate advanced air cooling technology with limited water usage.

The initial construction is estimated to be completed in late 2029, subject to planning and other approvals.

Although local power and water supplies are sufficient, the company should still secure local council development application approvals before building can start.

The site is located far away from residents, adjacent to the M2 freeway, but the company plans to include an art gallery and a one-acre park within the site to address potential community pushback, Jefferies said.

The company is expected to need an external capital partner to help fund construction of the facility, which will cost an estimated AU$3.5 billion to AU$3.6 billion.

Jefferies maintained a hold rating and a price target of AU$64.60 on Macquarie Technology Group.