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News release

Asian investors are set to be the most active in South Sydney’s growing residential development precincts Mascot, Wolli Creek and Arncliffe

Despite the proposed LEP amendments in Mascot still awaiting approval, residential developers have already begun buying future sites


SYDNEY, 23 April, 2013 – New investment in South Sydney’s growing residential development area including Mascot, Wolli Creek and Arncliffe is set to come from Asian developers, according to new Jones Lang LaSalle research.

Sam Brewer, Jones Lang LaSalle’s Head of South Sydney, said that with funding usually already in place prior to purchase and subsequent development of residential sites, it is offshore investors that are the most active.

“In Australia, it has historically been residential developers from Singapore and Hong Kong that have been the most visible on the domestic development landscape.
 
“Recently, large development companies from mainland China have started to look elsewhere in the world for opportunities as the development cycle in China cools.”
 
Mr Brewer said enquiry levels for residential development sites in South Sydney are strong from both offshore and local interests.
 
“Despite the proposed LEP amendments in Mascot still awaiting approval, residential developers have already begun buying future development sites in the area,” said Mr Brewer.
 
In March 2013, Meriton Group purchased a 31,500 sqm industrial site at 19-33 Kent Street (with the potential for 800-1200 new dwellings) from industrial specialist Goodman for a reported AUD 100 million. Jones Lang LaSalle has also just sold a further two sites at 661 Gardeners Road and 659 Gardeners Road in the newly rezoned area, sold as a combined area of 4,278sqm this month to Chinese funded local developer Longton.
 
“Longton now have three developments in Sydney and look forward to being a long-term player,” said Mr Brewer.
 
Jones Lang LaSalle’s Jeffrey Moxham, NSW Director of Sales and Investments, said Chinese residential developers were initially very active in Melbourne and the Gold Coast, but over the last two years, have turned their attention towards Sydney.
 
“We have transacted 18 sites in the last two years totalling over AUD 165 million, and 50% of these sales have been to Asian-based development companies. For every development site marketing campaign we execute, a number of new Asian groups emerge. 
 
“There are numerous Chinese-funded or Chinese-developed projects under construction in Sydney at the moment, including CBD projects around Hyde Park and Haymarket, and suburban residential developments in Botany, Rhodes, Kingsrove, Campsie, Parramatta, Crows Nest, St Leonards, Ryde and Burwood.
 
Mr Moxham said South Sydney continues to evolve. “A recent wave of amended Council Local Environment Plans (LEPs) is prompting new and proposed developments in areas like Mascot and Arncliffe, as old industrial zones are altered to new, mixed-use zoning, allowing for a new phase of residential development.”
 
In 2013, Botany Bay Council has proposed to amend the LEP to increase high-density residential development around the Mascot Station Precinct. The proposed zoning will alter existing industrial zoning.
 
“We expect a fresh wave of development interest to come from Chinese developers once the NSW Government approves the amendments to the Botany Bay Council LEP,” said Mr Moxham.
 
Mr Moxham said the attractiveness of Mascot’s proximity to public transport, growing white-collar employment opportunities and educational institutes will provide a marketing opportunity to Chinese developers’ target market – Chinese apartment buyers.
 
According to Jones Lang LaSalle Research, there has been an influx of Chinese money into Australia which has been facilitated by the Australian Government.
 
In November 2012, the Federal Government implemented the Business Innovation and Investment Visa (subclass 888), a new immigration visa class used to attract prominent global investors. Among other stipulations, applicants are required to make investments of at least AUD 5 million into complying investments, including residential development.
 
According to the Jones Lang LaSalle report, 7,000 subclass 888 visas have already been approved.
 
Mr Brewer said that over the last 20 years, South Sydney has been evolving from an industrial precinct to a residential area, with high-density residential precincts centred on train and retail hubs replacing traditional warehouse space.
 
“Demand for sites from residential developers is strong, with enquiry levels in the rezoned area high. With the unabated demand for residential space close to the CBD over the last decade, high-density residential development has spread through South Sydney. Local council LEP amendments have been the catalyst for change in the area and further changes are on the way.
 
“We believe that these conditions are conducive to further urban regeneration within South Sydney and the continued decline of the role of traditional industrial warehousing in the precinct. There are good opportunities for existing land owners and residential developers in South Sydney.
 
“Land owners will capitalise on the increased land values placed on their industrial warehouse locations. Residential developers will take advantage of the apparent undersupply of housing in the Sydney market, and the strong residential fundamentals that Mascot has to offer of very good public transport networks and close proximity to the CBD,” concluded Mr Brewer.