Development and construction giant Grocon is reportedly entering the build-to-rent sector with the $35 million purchase of a development-ready site at 256-266 City Road, Southbank.
The off-market transaction was made by agents Lemon Baxter and sold on behalf of Altus Property. The site area is 1,265 square metres and has a permit for 410 apartments over 61-storeys.
According to The Australian Financial Review Grocon will use the site for a build-to-rent – or multi-family– development aimed at executive tenants.
Grocon have dipped their toes in the build-to-rent sector through the Gold Coast development of the Commonwealth Games athletes village, which they plan to lease as a build-to-rent asset following the 2018 games.
The build-to-rent model is in its infancy in Australia but has made greater strides overseas, especially in the United States. Under the model, a developer will retain ownership of the units and develop an income stream through the rent.
Build-to-sell is more attractive to developers in the Australian market with sale prices that are achievable. Restrictive tax and planning rules have also made the implementation more problematic.
[Related reading: The Viability of Build to Rent]
Mirvac is looking to develop what would be Australia’s first major build-to-rent apartment development in Sydney, with the backing of major superannuation funds.
A report published in 2017 suggested that the market in Australia could see around $300 billion worth of residential assets owned by institutional investors under the model if it evolves favourably here.
Aside from Mirvac, Lendlease, Frasers and Stockland have been looking at the market to see how it might be viable on a large scale. Lendlease and the Canada Pension Plan Investment Board have this month launched a major build-to-rent partnership in the UK worth initially around $2.6 billion.