Chief executive Steve Hill said the council made the move after it had identified there was a lack of space in Balclutha for industrial growth.
He said ''being pro-active'' was the council's job, so to open up land for new businesses, or for the re-siting of existing businesses to an area where expansion was possible, it bought the 8ha of industrial-zoned site when it was approached by Heartland Bank.
''Businesses couldn't go anywhere,'' Mr Hill said.
''For some reason, nobody made decisions around making provision for growth and if you sit there and you don't make provisions for growth it gets like this - there's nowhere to go.''
Southern Cross Forest Products went into receivership in March 2014 and in April 2014 the Rosebank Sawmill closed. What had been a crisis had turned into an opportunity for the district, Clutha Mayor Bryan Cadogan said.
''It was a ghastly blow, the three biggest saw mills in our district closing down, but if you look at what's come out of it, Pan Pac (Pan Pac Forest Products) has bought the two in Milton ... and now this has given us the opportunity to drive the economy here,'' Mr Cadogan said.
He said a range of businesses could co-exist on the 8ha industrial park and the council had no interest in holding the land long-term. The purchase would have no effect on rates.
Mr Hill said he would not comment on the price the council had paid for the land.
''That's commercial confidence, as you would expect,'' he said.
However, selling council land that had been identified as serving no purpose had created ''the beginning'' of a fund that allowed for the purchase, he said.
Mr Hill said he did not yet have an exact figure of the ''substantial'' amount of surplus land the council held, but said it could be at least 50 to 100 properties of varying descriptions and sizes across the district that were not being used by council and would be sold.
''[The] council isn't buying [the land] to retain ownership indefinitely on that site, council's buying it so that it can promote and achieve the best quality development that we can - provide industrial land opportunities and business opportunities - and exit. Ultimately we do not want to own the land.''
Mr Hill said the council had already received emails expressing interest in the park after yesterday's announcement.
Some buildings on the property would remain, but much of the old sawmill site would be sold or removed.
''There's a lot of bare land, and that land can be built on,'' he said.
''We can sub-divide more, we can build ... all industrial.''
Brendan Cody, of Heartland Bank, said after an earlier purchaser withdrew, the bank wanted to avoid the site being land-banked and lying idle.
