It should, but the AI personality used by the Iconians and Torians is bugged, and will often leave its later-settled planets undeveloped.
That said, are you sure you aren't simply wiping out the Iconian buildings yourself? Most of the Iconian structures are not shared by any other civilization and will be demolished when you take over one of their planets unless you've traded for their techs (and you can't get all of them anyway).
