Data centres lift industrial land values and squeeze warehouse feasibility, JLL says
JLL research reported by AllCommercial shows data-centre developers paying up to 182.1 per cent above industrial land values in South Sydney, as a $155 billion pipeline competes with logistics projects for sites and power.
Data-centre developers are bidding for industrial land against warehouse and logistics projects, and in places they are paying far more, according to JLL research reported by AllCommercial. JLL puts the national data-centre investment pipeline at $155 billion, and projects that capacity will expand more than 13-fold to above 16GW by 2035.
In some outer-suburban locations the premiums over prevailing industrial land values run from 20.4 per cent to 63.3 per cent, JLL found, while South Sydney reached 182.1 per cent. The competition is flowing into large-lot pricing: between 2025 and 2026 JLL recorded growth of 9.6 per cent for two-to-five-hectare sites in Sydney's Outer Central West and 16.5 per cent in Melbourne's west.
Electricity, not land alone, is the binding constraint. JLL estimates that a 1MW data centre draws as much power as around 360 warehouses of 20,000sqm each, which is why closeness to substations and transmission lines can materially shift what a site is worth. CBRE has likewise flagged power access as a major hurdle for the sector as AI workloads and hyperscale demand grow.
Warehouse developers are feeling the effect. JLL's modelling indicates that the economic rents needed for new modern warehousing already sit around 30 per cent to 103 per cent above prevailing market rents in some locations, depending on market and development assumptions. AllCommercial said that over time this could reduce future industrial supply in some precincts.
The relationship also runs the other way, as data-centre construction adds to demand for conventional industrial space. JLL recorded 177,800sqm of gross industrial take-up from the construction sector over the past year, equal to 4.2 per cent of the total, the highest share since 2013 and nearly double the 10-year average. Some of that comes from suppliers of cooling, electrical gear and cabling that need to store or assemble products near project sites.
Sydney and Melbourne remain the main hubs, but JLL expects 2026 to bring more large campuses outside traditional availability zones, with developers considering regional New South Wales and Victoria, parts of Queensland and Perth. CBRE expects live capacity to move from roughly 1.3-1.4GW in 2025 to around 1.8GW within three years, yet still forecasts a supply gap of 0.7-1.7GW by 2028.
On policy, the Property Council told the federal Office of AI in October 2026 that data centres should be planned alongside industrial land, energy, infrastructure, housing and employment rather than as an isolated technology use. AllCommercial said the effect on land values is likely to vary by location, since many sites cannot provide what operators need.