Phoenix Expands Aussie Bets With $126M Lendlease Industrial JV in Sydney

Phoenix Property Investors is adding sheds to its growing footprint in Australia’s property industry as the Hong Kong-based shop unveils plans to develop a 30-hectare (74-acre) industrial and logistics park in Sydney with blue-chip local builder Lendlease.

The partners on Wednesday announced that they have signed an agreement to jointly build an A$185 million ($126 million) industrial precinct along Links Road in the western Sydney suburb of St Marys, aiming to develop logistics facilities in line with market demand.

With Phoenix having already established office, retail, residential and hospitality projects in Australia, tie-up with Lendlease takes the company into its first industrial project, but its country head sees the move as representing a preference for high-yielding opportunities.

“This project fits well within Phoenix’s opportunistic investment strategy in Australia which looks to acquire assets in markets where we see strong demand in the short-to-medium term with low levels of competing supply,” said Trent Winduss, partner and head of Australia at Phoenix. “We believe the St Marys industrial and logistics market aligns well with this investment thesis.”

Turning to Sheds

Phoenix is taking a majority interest in the joint venture with Lendlease acting as development and investment manager while holding a minority stake in the deal.

The partners expect to attract occupiers in manufacturing, transport and logistics industries in a bet on the rise of the domestic industrial sector as Australia promotes supply chain resilience.

With the joint venture set to submit its masterplan for the precinct this year, Lendlease and Phoenix said the site was suitable for development of logistics facilities of varying sizes, depending on market demand.

“The proposed St Marys precinct will meet demand and growth in the industrial and logistics sector, and we look forward to working with our new partner Phoenix, along with government stakeholders to create a new masterplan and development agreement for staged development of this strategic site,” said Tom Mackellar, managing director for development at Lendlease. Mackellar noted that bringing in a capital partner early helps the firm to optimise development and investment opportunities for the project.

Located at 75-103 Links Road, the site is located within a cluster of warehouses and factories in western Sydney about 10 minutes’ drive from St Marys intermodal terminal, a newly built freight hub that allows containerised cargo to move via rail between St Marys and Port Botany in the easternmost portion of the city.

The upcoming precinct is also situated about 50 kilometres (31 miles) from Sydney’s central business district.

Data from CBRE shows that average rents for top grade industrial assets in Sydney continued to climb in the first quarter after vacancy rates plummeted to a record low of 0.2 percent in the second half of last year.

Super-prime properties saw average rents surge by 5.9 percent in the first quarter from the three months prior, with the outer reaches of northwest Sydney showing the highest quarterly growth rate with rents climbing 13 percent during the three month period, according to the property consultancy.

Year on year, data showed rents for super-prime sheds surged 37.2 percent, although CBRE noted that rental growth is starting to slow.

Bullish on Aussie Market

The industrial JV is the latest sign of Phoenix’ growing focus on Australia as a primary market for its business.

Based on its website, Phoenix has one-fifth of its investment portfolio Down Under, making the country its fourth largest market, behind China, Japan and Hong Kong, which together accounted for 65 percent of its assets.

The two-decade-old firm has taken a cooperative approach to its latest market, teaming up with local developer Third.i for a series of joint ventures, including the Blue and William office project in North Sydney which the partners sold to Singapore’s Keppel REIT for A$327.7 million ($234.1 million) in late 2021.

Now the partners plan to begin construction later this year on Balfour Place, a mixed retail and residential project in Sydney’s Lindfield area which will yield 62 homes.