Australia’s data centre buildout is set to intensify competition for scarce industrial land in Sydney and Melbourne, potentially lifting warehouse rents sharply by 2028, according to new analysis from commercial real estate company JLL.
JLL said Australia is now the third-largest global destination for data centre investment, with a pipeline exceeding $155 billion. The firm said the investment pipeline would underpin up to 400,000 jobs, while also adding pressure to industrial land values as developers pay premiums in core metropolitan markets.
According to JLL modelling, economic rents for a standard 20,000 square metre warehouse in Sydney’s Outer Central West could rise 88% above current prime rents under high-growth scenarios. In Melbourne’s West, rents could exceed current market rates by 132% under similar assumptions, the company said.
JLL’s analysis described a rapid increase in planned capacity, with the sector’s pipeline growing from 451MW in 2015 to 1.2GW today. JLL said 16.2GW is now under construction or planned, which it described as more than 13 times current capacity.
The concentration of future build is likely to amplify land demand in already constrained markets. JLL said New South Wales and Victoria account for 91.3% of future data centre capacity.
Matthew Lee, Executive Director and Co-Head of Australian Data Centres at JLL, said the bigger issue for the sector is project delivery timelines rather than oversupply. “The greater concern is around the time it will take projects to come to market. There is no precedent for the scale of the data centre pipeline,” Lee said.
JLL also pointed to flow-on effects across industrial property. It said gross take-up from construction sector occupiers reached 177,800 square metres over the past year, representing 4.2% of total demand, which it said was the highest proportion since 2013 and nearly double the 10-year average of 2.2%.
Major data centre component suppliers have leased more than 100,000 square metres of warehouse space across Sydney in the past year, JLL said, while operators are also setting up logistics hubs next to their facilities.
Rick Warner, Director of Research at JLL Australia and author of the report, said JLL’s feasibility modelling shows “economic rents are already 30% to 43% above current market rents in Sydney, and 64% to 103% above in other Australian markets”, even before considering land premiums paid by data centre developers.
JLL also highlighted the power requirements associated with the buildout, stating that a one-megawatt data centre consumes electricity equivalent to 40 shopping centres of 50,000 square metres, 360 warehouses of 20,000 square metres, or 440 office towers of 10,000 square metres.
The company said data centre electricity demand is forecast to grow 25% per annum to 2030, adding to pressure on grids where it estimates 64% of Australia’s electricity remains fossil fuel-generated.
Beyond land and power, JLL said community acceptance will remain a key issue for developers and operators as the sector scales. Lee also noted a broader range of customers, beyond the traditional hyperscale buyers that have dominated the market.
JLL said regional locations with more available land and renewable energy resources could become more attractive as the market matures, potentially reshaping industrial location strategies. The company estimated the number of data centre developers operating at scale in Australia could roughly double over the next five years as overseas groups, mainly from Asia and the United States, enter the market.
