Kajima's local Icon brings $500m pipeline to new year
The office project on Church Street at Richmond, in inner-city Melbourne, which Icon developed.

Kajima's local Icon brings $500m pipeline to new year

Icon Developments, a wholly owned subsidiary of Japanese property giant Kajima Corporation, has hit 2022 running, with a $500 million development pipeline of mostly inner-city projects, underpinned by a decentralisation thematic.

The mix includes both residential and office, with four developments in hand in Melbourne, Brisbane and Auckland. A common theme across that pipeline – which Icon hopes to double again by next year – is its focus on opportunities outside CBDs.

“The primary focus over the 12-18 months ahead will continue to be medium density mixed-use residential and office projects in the major markets of Melbourne, Sydney, Brisbane and Auckland,” Matthew Bourke, chief executive of Icon Developments, told The Australian Financial Review.

“My view is that small-medium sized – less than 100-unit – apartment projects in inner urban locations that enjoy quality amenity and good public infrastructure will continue to be in demand.

“From an office perspective and even prior to the impact of COVID-19 we have been strong with our convictions that the fringe office market will continue to see robust demand and CBD decentralisation.”

Underscoring that strategy, JLL figures released this month show the take-up of additional office space in fringe and suburban markets has out-paced that in the Sydney and Melbourne CBDs in the past year.

Among its recent successes, Icon sold down an office project its developed at 600 Church Street at Richmond in Melbourne, a trendy inner-city market with a growing reputation as a tech and creative hub. Icon is now underway on an $80 million office tower in nearby Cremorne through a joint venture with the site owner Zagame Group.

Icon itself, along with Kajima and Zagame will all take up space for their respective headquarters in the new development at 116 Cremorne Street. The site is occupied by car dealership Lotus and will become part of the Icon’s portfolio of long-term hold assets.

Icon’s pipeline includes two upscale apartment projects at Brighton in bayside Melbourne: one is a joint venture with private developer Carpe Group while for the other project Icon is senior financier on a project being developed by Samuel Property.

The Japanese-backed developer has made its entry into the New Zealand market for the first time as well, funding local player Lamont & Co to transform a six-storey commercial office building in Auckland’s Newmarket into 68 luxury residences. Icon has also struck an agreement for its first Queensland project, a joint venture with developer Goldfields for 130 apartments at Milton, a riverside suburb in Brisbane.

Icon Developments operates separately to the construction business Icon Co. In 2005, the Icon businesses were given a major boost when Kajima, one of Japan’s biggest builders and developers, took control. Kajima subsequently took over another mid-tier builder, Cockram, and merged it with Icon.

Icon’s construction arm became embroiled in cost disputes after cracking was discovered in late 2018 at the 36-level Opal Tower it built in Sydney Olympic Park, forcing the evacuation of residents.

Evan Byrne, chief executive of Icon Construction, acknowledged the pressure on prices over the last 18 months as a result of supply chain issues.

“We have a national footprint across a range of sectors and the picture is different depending on the locations and the individual projects,” he said.

“Certainly across our entire business, prices are higher for timber and steel, and on the shipping front, we’ve experienced up to a four-fold increase in costs.

“While the higher costs are a concern, just as worrying, if not more so, is the delays in supply chains. This lack of certainty in the supply chain is a major factor in making investment decisions and delivering projects.”

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