How the defence boom is reshaping Adelaide’s commercial property market

“The scale and complexity of programs position Adelaide as a national centre of excellence for shipbuilding, nuclear capability and advanced manufacturing.”

Beyond the immediate uplift in defence activity, the investment wave is having a significant impact on Adelaide’s property sector – taking it from a steady secondary market to a far more competitive investment destination.

The rise in demand is largely driven by the AUKUS submarine program, a multi-decade pipeline that will see tens of billions of dollars flow into South Australia. Two of the most significant developments are the Osborne Naval Shipyard and the Edinburgh Defence Precinct, located in Adelaide’s north. 

These precincts are key strategic hubs, bringing with them major infrastructure investment and thousands of new jobs. Opie says around 10,000 defence industry jobs will be created over the next 20 years – 5500 of which will focus on AUKUS alone.

This translates to strong demand in the northern corridor.

“The inner-north and outer-north markets are the primary focus due to their proximity to shipbuilding and defence hubs, where land availability is shrinking and demand is accelerating,” says Tom Barrett, director of industrial and logistics at Colliers.

As that demand builds, activity is picking up across several asset types – largely industrial facilities and defence-aligned office spaces.

“Industrial and logistics assets remain highly sought after, with the state’s ongoing investment in defence, transport infrastructure and advanced manufacturing creating significant tailwinds as we move into 2026,” says Barrett.

Occupiers are seeking high-spec industrial facilities, as well as logistics and manufacturing hubs to handle supply chain activity and assembly requirements.

Much of this growth is being driven by subcontractors and supply chain businesses supporting major projects.

“Defence requirements are driving the delivery of larger, more specialised facilities with higher power capacity, enhanced security features, and technical specifications suited to advanced manufacturing and sensitive operations,” says Jamie McClurg, executive chairman of Adelaide-based developer Commercial & General.

Offices situated close to key precincts are also benefiting, with some tenants tied to defence moving into the CBD.

“We are seeing renewed interest in CBD office buildings with defence-aligned tenants, driven by secure covenants and long lease profiles,” says Jordan Schmidt, head of office capital markets and investment services (SA) at Colliers.

McClurg notes that the integration of industrial and office uses is creating a new sense of workplace alignment.

“These now are typically coupling work groups and workshop staff together for workplace productivity and culture,” McClurg says.

Opie adds that the scale of investment will have flow-on effects on other sectors, supporting broader business and services growth.

“Company and workforce growth across primes, engineering firms and professional services will also support wider retail and services demand,” he says.

The development pipeline is also evolving. McClurg notes that projects are becoming more targeted and closely aligned to defence activity.

“It has shifted development toward sites near defence precincts and increased the focus on pre-committed, purpose-built projects rather than speculative builds,” he says.

As a result of the defence boom, the city is attracting a new pool of investors looking to capitalise on its emerging growth. Unlike more cyclical sectors, defence is backed by long-term government funding and a predictable pipeline of projects.

“Investor enquiry has noticeably lifted as AUKUS and the Osborne shipyard expansion signal decades of guaranteed economic activity, underpinned by a $30 billion-plus pipeline and thousands of long-term defence jobs,” says Schmidt.

“Capital is responding to the stability and visibility of demand that defence brings to both industrial and office assets.”

Investors are typically domestic institutional and private capital, but Schmidt mentions that some offshore activity is emerging, often via local partnerships.

Competition is becoming increasingly intense, as land availability tightens and rents stabilise and rise. 

According to Cushman & Wakefield, Adelaide industrial and logistics assets had a vacancy rate of just 2.3 per cent in Q4 2025 – the lowest in the country. The firm also reports that Adelaide has less than 2.5 years of industrial land supply remaining based on current take-up.

The tightening is flowing through to rents: JLL research shows that industrial rents in the city’s north-western corridor have surged by up to 59 per cent over the past five years.

“Competition for well-located industrial assets has intensified, with continued demand for core-plus and value-add opportunities. Land values throughout the inner-north and northern precincts continue to grow as supply tightens,” says Barrett.

McClurg notes the sector is also contending with broader construction challenges, with timelines impacted by labour shortages and productivity constraints.

The defence boom is only just beginning. Long-term government investment is set to reshape Adelaide for decades to come, firmly positioning it as a genuine alternative to Australia’s eastern capitals.

“This is best understood as a long-term structural shift, underpinned by decades-long defence investment rather than a short-term cyclical trend,” says McClurg.