Transport for NSW acknowledged the industrial land vacancy rate had improved nationally and in Sydney in the past few years, but it was still \u201cwell behind international rates and below the ideal market level\u201d.<\/p>\n
\u201cThe increasing demand on freight, from both increasing population and changing consumer patterns, will continue to drive the need for more industrial land for high volume logistics handling, and localised distribution centres across Sydney,\u201d a spokesperson said.<\/p>\n
Transport for NSW warned that fragmentation of freight activities due to competing land uses could result in increased costs for business and higher prices for consumers, and said government needed coordinated policy to manage land use strategically.<\/p>\n
Sign up for the Breaking News Australia email<\/a><\/p>\n The peak body for the datacentres sector, Data Centres Australia, said the vacancy rate was now close to 4%, citing CBRE research released on Tuesday<\/a>.<\/p>\n Its chief executive, Belinda Dennett, said supply was also responding, with \u201cstrong new development and continued logistics investment in western Sydney\u201d.<\/p>\n \u201cThe answer is to release and service more land and plan it well, putting the right uses on the right land, so freight keeps the transport-connected sites it depends on while datacentres deliver the investment, jobs and infrastructure they bring, and continue to invest in energy and water infrastructure that supports the broader ecosystem.\u201d<\/p>\n Dennett agreed Sydney needed a coordinated approach to industrial land and it was not a contest between the two sectors.<\/p>\n Transport for NSW\u2019s position was supported by the Australasian Supply Chain and Logistics Association (ASCLA). The peak body\u2019s chief executive, Steven Ballerini, said it reflected what the group was hearing.<\/p>\n \u201cWe\u2019re not opposed to datacentres as they\u2019re critical infrastructure for the digital economy. But they are now competing directly with freight and logistics for the same well-located industrial land, and that\u2019s a competition with real consequences,\u201d he said.<\/p>\n \u201cUnlike a datacentre, a distribution centre has to sit close to the population it serves; you can\u2019t simply move it to the urban fringe without adding cost, distance and emissions to the supply chain.\u201d<\/p>\n \u2018Pump the brakes\u2019<\/p>\n The Reserve Bank board has also warned rising investment in datacentres could add to inflation and has already put upward pressure on interest rates worldwide.<\/p>\n Datacentre spending makes up a growing share of Australia\u2019s investment in machinery and equipment, which was the single largest contributor to economic growth in early 2026. Commercial and industrial building approval values hit a record high in May because of new datacentre projects, the Australian Bureau of Statistics reported on Wednesday.<\/p>\n Graph showing the total value of approved commercial buildings not elsewhere classified, by month<\/a><\/p>\n The strength of business investment caught the RBA board by surprise, according to minutes from its June meeting released on Tuesday. The board discussed the risk the buildout could make skills shortages worse \u2013 construction costs were already high and workers in short supply before datacentre builds began hiring.<\/p>\n Pat Bustamante, a senior economist at Westpac, said the RBA would raise rates to cut spending elsewhere if datacentre spending competed for land and resources and pushed up prices.<\/p>\n \u201cThe RBA essentially will have to make room for this expansion because this expansion isn\u2019t really interest [rate] sensitive,\u201d he said.<\/p>\n Bustamante said home building would come under the most pressure if costs or rates rose further.<\/p>\n
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