Data Centres and the Squeeze on Logistics Land

By Steven Ballerini | CEO of Australasian Supply Chain & Logistics Association (ASCLA)

For most of the past decade, the competition for industrial land on the fringes of Sydney and Melbourne was a contest between logistics operators, manufacturers and the developers who built for them. That contest has acquired a new and considerably better-funded participant. Data centre developers, backed by hyperscale cloud providers and the global rush to build capacity for artificial intelligence, are absorbing hundreds of hectares of industrially zoned land each year, paying premiums that warehouse users cannot match and, increasingly, acquiring sites that were planned, zoned or already built for freight.

Two stories from the past fortnight sit at opposite ends of the same problem. In Sydney this week, Goodman Group appeared before the Senate inquiry into artificial intelligence and data centres to defend its proposed Project Mars facility in the Lane Cove West Business Park, and in Queensland, Anthropic signed its first Australian data centre lease at the Western Downs Digital Park near Dalby. One shows what happens when data centres compete for scarce metropolitan employment land, and the other shows where the industry may be pushed as that land runs out.

The Scale of the Pipeline

JLL research released this month ranks Australia as the world’s third-largest data centre investment destination, with a pipeline of more than A$155 billion. Operational capacity of around 1.2 gigawatts sits against 16.2 gigawatts under construction or planned, 91.3 per cent of it in New South Wales and Victoria, and JLL’s Matthew Lee has said there is no precedent for a pipeline of this scale. The shift is also visible in the balance sheets of the developers that have traditionally built Australia’s warehouses. Goodman Group’s FY26 results in August showed development work in progress of A$19.7 billion, 78 per cent of it data centres, and Stockland, Charter Hall and Centuria are among the other industrial landlords now active in the sector. Capital that would once have gone to new logistics estates is increasingly going to powered land instead.

Outbidding the Warehouse

Cushman & Wakefield reported in August that data centre acquisitions drove a record 900 hectares of industrial land take-up in 2025, with more than 300 hectares absorbed by data centres in 2026 so far. Only 20 per cent of the national 12,600-hectare industrial land pipeline is active and developer-controlled, equal to just over three years of supply, and major developers now hold less than 50 hectares in Sydney.

Price is where the competition bites. JLL analysis reported by commercialrealestate.com.au found that data centre developers have paid premiums of between 20.4 and 63.3 per cent for industrially zoned land, and land values rose 16.5 per cent in Melbourne’s west and 9.6 per cent in Sydney’s outer central west in the year to June. Because a new warehouse must earn a return on the land beneath it, those gains flow into rents. JLL’s Rick Warner has noted that economic rents, the level needed to justify new construction, are already 30 to 43 per cent above prime rents in Sydney, and JLL’s high-growth scenario has rents for a typical 20,000 square metre warehouse potentially doubling in some markets by 2028.

When Freight Land Becomes Server Land

The most direct displacement occurs when logistics land is repurposed. At Mamre Road, Kemps Creek, ISPT is seeking approval for a data centre campus of up to one gigawatt on a 52-hectare site originally held as a logistics park, with AirTrunk reported to have agreed to acquire it subject to approval. The precinct’s planning controls require development to support the Western Sydney Intermodal Terminal, and the Australian Logistics Council recommended in April that the proposal be refused, warning that it would prevent warehousing co-locating with the terminal, put more containers on roads while rail’s share of Port Botany volumes remains well below the state’s 28 per cent target, and tighten supply and raise rents across Western Sydney.

Melbourne offers a similar example, with Stockland lodging plans for a 250-megawatt campus at Laverton on the site of a 20,000 square metre warehouse it acquired from Toll for A$35.5 million in 2025.

The Suburbs Push Back

The Lane Cove hearing showed how quickly the debate is moving into politics. Project Mars is a proposed 90-megawatt facility with 49 diesel generators, located around 16 to 20 metres from neighbouring homes and 160 metres from a primary school. Liberal senator Sarah Henderson called it grossly irresponsible and urged Goodman to abandon it, and Goodman’s general manager of development, Ben McGilp, acknowledged the company did not yet have a social licence for the project.

Councils raised the land question directly. Northern Sydney councils have identified 27 existing or potential data centre sites in their region and argued that data centres should not displace strategically important industrial and employment land, with Lane Cove deputy mayor Rochelle Flood warning they could occupy nearly half of the Lane Cove West Business Park. Seven councils have called for a moratorium, and four of them, Hume, Brimbank, Melton and Maribyrnong, cover much of Melbourne’s western logistics corridor.

Victoria announced on 22 September that new data centres will be banned from residential zones and near schools, and will require a 150-metre buffer from homes. Data Centres Australia chief executive Belinda Dennett objected that comparable industrial uses, such as warehouses and logistics facilities, face no such restriction. The comparison is telling, because rules that keep data centres away from housing are likely to steer them further into the industrial zones that warehousing relies upon. New South Wales, meanwhile, now offers a 75-day assessment commitment to data centres meeting its new performance principles.

Heading Regional

Anthropic’s lease points to one possible release valve. The Western Downs campus is being developed by Zerra DC on approximately 725 hectares near Dalby, valued at A$32 billion, with Anthropic aiming to begin using the first stage in 2027. The lease remains subject to Foreign Investment Review Board approval and outstanding planning and funding decisions, and federal MP David Littleproud and local residents have raised concerns about power reliability. A regional site of that scale nonetheless carries none of the land-use conflict seen at Lane Cove or Mamre Road. Training artificial intelligence models can tolerate distance from users in a way that cloud and latency-sensitive services cannot, however, so metropolitan industrial land is likely to remain in demand even as some new capacity moves to the regions.

It Is Not All Loss for Logistics

The build-out also generates work for our sector. JLL found that data centre suppliers leased more than 100,000 square metres of warehouse space in Sydney over the past year, and the flow of transformers, generators, cooling plant and server hardware creates demand for high-value project logistics. Market conditions have also eased somewhat, with CBRE reporting national industrial vacancy of 3.2 per cent in the first half of 2026, Sydney at 3.5 per cent and Melbourne at 4.7 per cent, still below the long-run equilibrium of around four per cent.

The Final Word

Data centres are essential infrastructure, and the investment brings genuine economic benefit. The difficulty is that they are competing for the same finite pool of serviced, well-located industrial land that freight depends upon, and they can pay considerably more for it. Infrastructure Partnerships Australia has warned that the loss of rezoned industrial land is effectively permanent, estimating that partially displacing freight activity from Botany to Eastern Creek alone could add around A$137 million a year in transport, congestion and environmental costs, and the Property Council has argued that data centres must be planned for alongside freight and logistics rather than in competition with them.

For operators, lease renewals and expansion plans in Sydney’s and Melbourne’s west should be approached earlier than in the past, on the expectation that replacement stock will be priced off higher land values, and network strategies should weigh the case for density, automation and consolidation. The industry also needs to be present in the planning debate. The Senate committee is due to report on 16 November, and ASCLA will continue to advocate for planning frameworks that preserve land for freight, particularly around intermodal terminals and the distribution corridors on which Australian supply chains depend.

Sources

The Australian Financial Review, “Data centre developers feel the heat in Sydney’s north shore,” 22 September 2026 (Senate inquiry hearing on Goodman Group’s Lane Cove proposal); The Australian Financial Review, “Anthropic lands its first lease for an Australian data centre,” 16 September 2026 (lease at Western Downs Digital Park); The Point, “Goodman Group grilled over data centre planned just 16 metres from homes,” 23 September 2026 (Project Mars, three storeys; 16 metres from neighbouring property line; approximately 160 metres from a primary school; comments by Senator Sarah Henderson and Goodman’s Ben McGilp, including acknowledgement that Goodman did not yet have social licence; 90 megawatts; 49 diesel generators); North Sydney Sun, “Northern Sydney councils identify 27 potential data centre sites,” September 2026 (27 sites; approximately 1,000 megawatts and 232,000 square metres across Lane Cove, Willoughby and Ryde; nearly half of Lane Cove West Business Park; concern over displacement of industrial and employment land); ABC News, “AI giant Anthropic signs agreement for $32b Queensland data centre,” 16 September 2026 (Zerra DC; approximately 725 hectares near Dalby; A$32 billion; around 1,000 ongoing jobs; use from 2027; Foreign Investment Review Board approval; comments by David Littleproud and community members); ChannelLife, “Anthropic leases first stage of Queensland data campus,” 22 September 2026 (first-stage anchor tenancy; approvals and funding decisions outstanding); JLL research as reported by w.media, “Data centre boom could push Australian warehouse rents sharply higher,” 8 September 2026, and Information Age (ACS), “Australia now the world’s third-largest data centre market,” 10 September 2026 (A$155 billion pipeline; 1.2 gigawatts operational against 451 megawatts in 2015; 16.2 gigawatts planned or under construction; 91.3 per cent in NSW and Victoria; economic rents 30 to 43 per cent above prime in Sydney and 64 to 103 per cent above elsewhere; 88 and 132 per cent high-growth scenarios; more than 100,000 square metres leased by data centre suppliers in Sydney; 177,800 square metres of construction-sector take-up; comments by Matthew Lee and Rick Warner); commercialrealestate.com.au, “Data centre boom to double Australian industrial rents,” September 2026 (land premiums of 20.4 to 63.3 per cent; land value growth of 16.5 per cent in Melbourne’s west and 9.6 per cent in Sydney’s outer central west to June 2026; rents potentially doubling by 2028; developers active in the sector); Goodman Group FY26 results, 20 August 2026, as reported by Kalkine Media (operating profit of A$2.67 billion; A$19.7 billion work in progress across 50 projects; 78 per cent data centres; power bank of 6.4 gigawatts); Cushman & Wakefield, “The Industrial Land Shift,” August 2026 (record 900 hectares of take-up in 2025; more than 300 hectares absorbed by data centres in 2026; 20 per cent of 12,600-hectare pipeline active; just over three years of supply; less than 50 hectares held by major developers in Sydney); w.media, “ISPT site to host 1GW data center in Western Sydney,” 26 September 2025, and BeBeez International citing Green Street News and DatacenterDynamics, 11 November 2025 (52-hectare logistics park at 706–752 Mamre Road; up to one gigawatt; AirTrunk preliminary agreement subject to planning approval; 850 hectares and 17,000 jobs in the precinct); Australian Logistics Council, submission on the Mamre Road Data Centre Campus State Significant Development, April 2026 (recommendation of refusal; Western Sydney Intermodal Terminal; 28 per cent rail mode share target at Port Botany; effect on supply and rents); DatacenterDynamics, “Stockland files to develop 250MW data center campus in Melbourne,” May 2026 (Cherry Lane, Laverton; former Toll warehouse of approximately 20,000 square metres acquired for A$35.5 million; approximately 350 megawatts of secured power including Brooklyn Distribution Centre); Premier of Victoria, “We need data centres but we set the rules,” 22 September 2026, and ABC News, “Victoria bans data centres from residential zones and near schools,” 22 September 2026 (150-metre buffer; renewable energy and water requirements; comments by Belinda Dennett, Data Centres Australia); Clayton Utz, “NSW draws the line: what the new data centre policy framework means,” August 2026 (framework released 17 August 2026; six performance principles; 75-day assessment commitment; A$51.4 billion state significant pipeline); CBRE, “Australia’s Industrial & Logistics Vacancy Report 1H26,” June 2026 (national vacancy of 3.2 per cent; Sydney 3.5 per cent; Melbourne 4.7 per cent; forecast peak of 3.5 per cent; four per cent equilibrium); Infrastructure Partnerships Australia, submission on the Draft Statewide Policy for Industrial Lands, 27 February 2026 (permanent loss of rezoned industrial land; A$137 million annual cost of partial displacement of freight activity from Botany to Eastern Creek); Property Council of Australia, “Industrial land is now an infrastructure challenge,” 25 August 2026 (Ready to Grow: Unlocking Industrial Growth in NSW; planning for data centres alongside freight and logistics). Details accurate as at 25 September 2026.