Data Centre Boom Could Double Australian Industrial Rents
JLL reports Australia's A$155 billion data centre pipeline is intensifying competition for industrial land, with modelling showing warehouse rents in
Warehouse rents in key Australian markets could double by 2028, according to JLL. The global property consultancy attributes this forecast to a boom in data centre investment, which is pitting technology developers against traditional logistics operators in a race for industrial land.
JLL said on Tuesday that the country's data centre development pipeline has grown to over A$155 billion (US$111.6 billion). Capacity under construction or in planning has risen to 16.2 gigawatts, which is more than thirteen times current levels. This surge in demand has forced data centre providers to pay premiums for sites, particularly in New South Wales and Victoria, which together account for 91.3 percent of planned national capacity.
Projected Rent Increases
JLL's modelling, based on high-growth scenarios, shows dramatic potential rent increases for traditional warehouse space. In Sydney's Outer Central West, rents for a 20,000 square metre warehouse could rise 88 percent above current prime rates. The pressure is even greater in Melbourne's West, where rents could exceed current market rates by 132 percent.
Rick Warner, director of research at JLL Australia, explained the existing gap. "Our feasibility modelling shows economic rents are already 30 percent to 43 percent above current market rents in Sydney, and 64 percent to 103 percent above in other Australian markets, even before factoring in land premiums paid by data centre developers," he said. Warner noted that traditional warehouse developers now face difficult decisions regarding location, scale, and returns.
Land Value and Market Impact
The competition is directly impacting land values. JLL reports that data centre operators are driving demand for industrial sites between two and five hectares in size. In the 12 months to June, average land values for such plots climbed 9.6 percent year-on-year in Sydney's Outer Central West. Prices in Melbourne's West jumped by 16.5 percent.
The effect extends beyond the primary developers. Component suppliers for data centres are also competing for industrial space. In Sydney alone, these firms have collectively leased more than 100,000 square metres of warehouse space in the past year.
Sydney led a rebound in Australia's industrial markets in the second quarter of 2026. The city recorded its strongest quarter of demand in over a year, with gross take-up reaching almost 375,000 square metres. Vacancy in Sydney tightened to 3.7 percent, down from 3.8 percent in the first quarter. Melbourne's overall vacancy edged up to 4.2 percent, but available space in the city's key western area tightened to 4.3 percent, its lowest level in a year.
Infrastructure and Strategic Shifts
Beyond land competition, the data centre sector is straining national infrastructure. JLL notes that a single one-megawatt data centre consumes electricity equivalent to 40 shopping centres of 50,000 square metres each. Electricity demand from data centres is forecast to grow 25 percent annually until 2030, pressuring grids in a country that relies on fossil fuels for about 64 percent of its power.
Electricity transmission company Transgrid has warned data centre applicants about network constraints. The company has received connection enquiries representing over 20 gigawatts of data centre load, which is about double the current peak demand of New South Wales. The transmission network has limited capacity to support additional large-scale connections.
These rising costs and constraints are prompting a strategic shift. Developers are looking beyond Sydney and Melbourne for hyperscale AI computing projects, targeting areas with more readily available power generation.
Zerra DC, the data centre unit of Singapore's AGP Sustainable Real Assets, recently filed plans for a 1.44-gigawatt campus in rural Queensland. The site, northwest of Dalby, is close to gas-fired power stations, a solar farm, and a transmission substation in the Western Downs region, which hosts an estimated 5.4GW of generation and storage capacity.
Approvals for projects in established markets are facing hurdles. Sydney-based Goodman Group won approval last week from the New South Wales government to build a A$1.4 billion data centre in Macquarie Park, known as Project Apollo. However, an application for another Goodman project, a 90MW facility in Lane Cove West dubbed Project Mars, has been paused at the request of Sydney Water pending further supply studies.
Goodman has been a major player in the industrial land market. In June, the company announced it would take full control of 1.3 million square metres of industrial properties in Sydney and Brisbane. This move followed a A$2.65 billion agreement to buy out its portfolio partner, Washington H Soul Pattinson and Company. JLL states that Australia is now the third-largest destination globally for data centre investment.
