The AI investment wave could create a new industrial demand cycle

The industrial and logistics sector has enjoyed a structural tailwind from e-commerce over the past decade. That trend remains intact, supported by population growth, consumption and the continued need for housing and infrastructure. But another source of occupier demand is emerging through the physical infrastructure required to support Australia’s growing digital economy.

Australia’s data centre pipeline is expanding rapidly. Oxford Economics forecasts investment to increase from around $20 billion in 2026 to more than $60 billion by 2030, with cumulative investment potentially exceeding $240 billion over the five years to 2030.

The Federal Government is also positioning artificial intelligence as a national priority. Recent discussions around a proposed $21 billion deal involving Anthropic highlight Australia’s ambition to become an active participant in the global AI ecosystem.

Much of the property conversation has understandably focused on data centre sites, investment volumes and access to power. However, the industrial implications extend beyond the facilities themselves.

Every data centre requires a substantial physical supply chain. Buildings must be constructed, electrical and cooling infrastructure delivered, and specialised equipment imported, commissioned and maintained. While much of the technology comes from overseas, its delivery and operation rely on domestic logistics, infrastructure and industrial businesses.

A broader, more persistent demand cycle?

The mining investment boom offers a useful comparison. Its development phase generated substantial demand for freight, construction materials, equipment storage, contractors and supporting industrial space. As projects moved into production, much of that construction-related intensity moderated.

Data centres may create a different cycle. Each project has a finite construction period, but Australia’s development pipeline is expected to extend well into the 2030s, allowing contractors, manufacturers and technical suppliers to move between projects. Once facilities become operational, activity continues through energy, cooling, security, maintenance and technical services.

The wider supply chain effect is already evident. Mandala estimates construction of Australia’s existing data centre capacity has contributed $13.8 billion in economic activity, with 55% generated indirectly through the wider supply chain. Build-out, cooling systems and IT infrastructure were among the largest contributors.

For industrial markets, this could translate into demand for secure storage, hardstand, technical distribution, equipment staging, workshops, service centres and higher-specification facilities supporting installation and maintenance.

Evidence of this flow-on demand is beginning to emerge internationally. Savills Research forecasts that Europe alone could require an additional 8.5 million sq ft (nearly 790,000 sqm) of warehousing space to support data centres over the next three years. While Australia’s requirements will reflect its own development pipeline and supply chain structure, the European experience demonstrates that the industrial footprint can extend materially beyond the data centre campus.

The opportunity also extends beyond businesses directly servicing data centres. Oxford Economics forecasts positive growth across wholesale trade, transport and storage, and manufacturing over the five years to 2031. Transport and storage is expected to remain the fastest growing of the three sectors, while wholesale trade accelerates and manufacturing returns to growth. Together, these sectors represent a broad occupier base for industrial floor space.

Mandala estimates Australia’s operational data centre capacity could generate $5.6 billion in annual economic activity and support 23,040 ongoing jobs by 2030. While not all of this activity will translate directly into more industrial floor space, continuing requirements across cooling, maintenance, equipment servicing and facilities management should support a wider network of suppliers and service providers. Periodic technology upgrades may add further demand for equipment transportation, distribution and installation.

This activity will add to, rather than replace, demand generated by population growth, housing, infrastructure, consumption and e-commerce. 

AI could influence industrial property through two channels: by generating a new physical supply chain around digital infrastructure, and by changing what established manufacturing and logistics occupiers require from their facilities.

The timing is significant. Savills Research forecasts national industrial supply to fall by around 30% in 2027. A broader occupier base competing for less new space could reinforce demand for strategically located adaptable and technically capable facilities.

For owners and developers, the opportunity is to position assets for an expanding group of infrastructure, logistics and technical-service occupiers. For occupiers, securing suitable facilities may become increasingly important as the development pipeline contracts. AI infrastructure could become another structural source of industrial floor space demand, supporting Australia’s established logistics economy while opening new opportunities across a broader range of assets and precincts.

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The postings by any individual on any blog do not necessarily represent the position of Savills, its strategies or opinions.