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Covid Conditions Ripe for Build-to-Rent


At a time when Australia is looking to construction as a way to help the economy rebound as quickly as possible, build-to-rent is becoming an increasingly strong option.

Build-to-rent developments, designed for renting professionally managed apartments on a long-term basis, are now serving as an appropriate response to dragging housing affordability, rising unemployment and falling consumer confidence.

Over recent years Mirvac has spearheaded Australia's push into the emerging institutional asset class.

The developer launched its $1 billion Australian Build-to-Rent Club in July of 2018 and by 2023 will have a total of 1,600 build-to-rent apartments.

Mirvac's build-to-rent general manager Adam Hirst told The Urban Developer the model was well placed to “supercharge” residential construction due to the absence of pre-sales to kickstart projects— making them truly “shovel ready”.

“It’s been encouraging to see this acknowledged by government in recent weeks, however this will need to be followed up with meaningful policy response if the sector is to reach the scale we have seen in other markets.”

Mirvac Build to Rent
▲ Developers, housing advocates and policy makers around the country are keen to identify the necessary means to establish a broadscale build-to-rent sector as homeownership contracts. Image: Mirvac


“While the fundamentals driving demand for build to rent in Australia have not changed, the uncertainty and financial instability caused by Covid-19 are likely to make build to rent an increasingly attractive option.”

The developer's first build-to-rent project in Sydney's Olympic Park is due to be completed in the next three months with leasing due to start next month.

Construction of Mirvac's Melbourne build-to-rent projects at Queen Victoria Markets and Brunswick are also under way.

“We are confident these pioneering projects will showcase the significant benefits of the build to rent model to government, investors and our customers and in doing so act as a catalyst for change in support for the emerging sector,” Hirst said.

Mirvac's recently acquired former Melbourne Convention Centre site in Spencer Street, which it purchased for $200 million, will also be turned into a mixed-use development that will include office space and 430 build-to-rent apartments.

Greystar, whose parent company is the biggest operator of apartments in the US, holds two adjoining sites in Melbourne's South Yarra set to be turned into a mixed-use precinct with more than 500 build-to-rent apartments by 2023.

Developer Kanebridge Property is also undertaking 1,500 build-to-rent apartments in Sydney’s north west corridor.

Private equity firm Blackstone, which has an $11 billion portfolio in Australia, is also "well progressed" on its second build-to-rent project, a mixed-use development in Caulfield with plans for 827 homes.

▲ Only a limited number of developers have entered the sector due to tax constraints, planning concerns and uncertainty surrounding legislation. Image: Assemble/Hayball Architects
▲ Only a limited number of developers have entered the sector due to tax constraints, planning concerns and uncertainty surrounding legislation. Image: Assemble/Hayball Architects


Melbourne developer Assemble is pressing ahead with its second build-to-rent development at Kensington in the city's inner-north, offering residents the option to buy their apartment at the end of a five-year rental period.

Assemble managing director Kriss Daff told The Urban Developer conditions were looking favourable for the emerging asset class following the institutionalisation of the student accommodation sector.

“I think the Australian superannuation funds are going to be big players within this sector moving forward looking for long-term, stable returns—which in turn will be a shot in the arm for build-to-rent,” Daff said.

“Having the fourth biggest pension fund market in the world is a big driver, there is a huge amount of capital looking for domestic investment opportunities.”

“For industry funds and union based-funds, build-to-rent housing is right in their hitting zone, with high levels of membership with relatively low incomes.”

Using its own model, Assemble has pioneered an innovative approach to homeownership, unlocking access to design-driven, community-oriented apartment living while addressing affordability and security.

Daff said in the current low interest rate, low-yield environment there was plenty of cash floating around creating heightened competition among investors but sentiment around build-to-rent remained unchartered.

“Heading into a long and low investment thematic investors will be looking for stable long-term yields but it can often be hard to convince people to be a first mover in a space that is reflecting a lower yield than what is available in an established asset class.”

Assemble has sounded out plans to bring its build-to-rent model to Sydney through partnerships with existing local developers and has also eyeing a site in Woolloongabba for its push into Brisbane.

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Article originally posted at: https://theurbandeveloper.com/articles/covid-conditions-ripe-for-build-to-rent