We’re sorry, this feature is currently unavailable. We’re working to restore it. Please try again later.
The trickle of build-to-rent (BTR) developments is turning into a stampede as a deep-pocketed foreign backers outline their expansion plans in the nascent sector.
The New York-based Sentinel Real Estate Corporation’s local arm last week unveiled plans for up to $1.5 billion of local BTR projects, in partnership with Dutch pension fund manager PGGM. Sentinel’s third local venture to date – a 168-unit site called The Briscoe in Roden Street, West Melbourne – this week reached “topping out” stage.
The Roden Street BTR facility in West Melbourne being developed by Sentinel.
Owned by Blackstone’s real estate funds, Realm Australia is completing its second project: a 437-apartment complex in Caulfield in south-east Melbourne.
These players join earlier local entrants such as Mirvac and Macquarie and foreign investors Greystar and Oxford Property.
Popular in Europe and the US, build-to-rent involves the developer building (or in some cases acquiring) the asset and retaining ongoing ownership and management rights. Tenants typically have more flexible leasing terms than usual and enjoy a wider array of facilities such as pools, yoga rooms and even cinemas.
Colliers research shows Australian BTR stock stood at 2900 units at the end of 2021, but is forecast to nearly double to 5150 units this year and then double again to about 12,000 by 2024.
Currently, 8100 units are under construction and 4400 with a high prospect of delivery. A further 4000 were recently completed.
Of the “active” BTR supply of around 16,500 units by 2026, 58 per cent is forecast to be in Melbourne – where more permitted land is available – with 15 per cent in Sydney.
A further 25 per cent of units is expected to be in Queensland, a legacy of Gold Coast Commonwealth Games athletes’ accommodation having been converted to BTR.
Melbourne also accounts for 72 per cent of this year’s expected 2200 completions, with Sydney accounting for 13 per cent and Brisbane a further 15 per cent.
Colliers’ national BTR director Robert Papaleo said the sector could play a significant role in mitigating the expected housing supply crunch as migration resumed.
Data shows Sydney “built-to-sell” apartment commencements fell to a decade low of 7700 in 2021/22.
Charter Keck Cramer data shows Sydney “built-to-sell” apartment commencements fell to a decade low of 7700 in the 2021 and 2022 years, compared with a peak of 31,000 in 2013. Melbourne starts fell to 5900 from their peak of 24,300 in 2015.
Mr Papaleo said while there was no lack of BTR demand, there was a shortage of sites that suited the criteria of sophisticated investors.
“Some suburbs in Melbourne and Sydney might have permitted schemes, but at this point in the market’s maturity the investors aren’t comfortable participating just yet.”
He said while BTR to date had been CBD focused, site selection was evolving to suburbs with the right demographic mix, as well as hybrid retail-residential developments.
Regarding Sentinel, the first $700 million tranche of the PGGM venture will cover about 2500 units, with the first two development sites already confirmed. Sentinel has been keen on the Australian market for a decade and completed the first BTR complex – the eco-friendly Element 27 in Perth’s Subiaco – in 2019.
“The common reaction early on was Australians don’t rent, the yields aren’t high enough,” said Sentinel Real Estate Corporation president Michael Streicker. “We thought there are enough supportive factors to move forward in Australia, first with our balance sheet and then with institutional capital.”
Mirvac’s first build-to-rent property, the Pavilions at Sydney Olympic ParkCredit:
A Mirvac spin off, developer Novus expects to complete its first local BTR project, Novus on Sturt, in 2024. In Melbourne’s Southbank precinct, the 173-apartment project designed by upmarket architect Rothelowman gives a nod to the precinct’s arty vibe and includes an open-air dog run and dog wash stations.
Novus is seeking planning permission for Novus on Harris, a 200-unit site in the Sydney satellite of Parramatta. Construction is expected to start in mid-2023.
The company is also eyeing at least two more sites in Melbourne and Sydney and is also interested in the Brisbane and Canberra markets.
“From a developer viewpoint, there certainly is an undersupply of housing, and it’s only going to get worse as borders open and skilled worker visas are turned on,” said Novus co-founder Jason Goldsworthy.
Blackstone real estate principal Tom McDonald said Realm Australia’s first project – the 200-unit Kangaroo Point in Brisbane – was fully leased 12 months after opening a year ago “and we expect Realm Caulfield to face similar demand.”
Copyright © 2022