Last year, we wrote about a relatively new development model in Australia called build-to-rent. Since then, this new asset class has gained momentum, and we’re seeing more and more build-to-rent projects become a reality in Australia. In that light, we thought it worthwhile to briefly recap what build-to-rent is, and highlight a few of the new projects that are occurring.
What is build-to-rent?
Build-to-rent is different to ‘normal’ renting. Build-to-rent is a mixed-tenure model accommodating social and affordable housing.
The premise is that government can partner with the private sector to help alleviate rental accommodation scarcity, provide discounted rental opportunities, and improve social housing accommodation to give stability to vulnerable people least able to access and sustain housing through other housing options.
Of note, build-to-rent residential apartments are owned wholly by the developer ie. the apartments are never sold to individuals to reside in or rent out. And as such, there is no body corporate involved. However, it can be operated as a managed investment trust for individuals to invest in the companies that create the build-to-rent developments, hence can provide individuals with a new source of investor income. In addition, the developments can often have institutional investors, such as a superannuation fund.
As it’s in its infancy, build-to-rent would need adequate regulations on the owner/developer of the build as it’s not a familiar development model in Australia. But the good news on the construction front is the potential for many jobs to be created as more and more people seek alternative rental options that focus on strengthening the social impact of inclusion, affordability and sustainability.
Below we look at a few of the current projects that are occurring. As there are too many build-to-rent projects to mention, our main emphasis will be on Melbourne’s latest projects, as they have the highest proportion of build-to-rent development in the nation, followed by Brisbane.
Melbourne build-to-rent projects
Project 1
- Location – Footscray
- 702 build-to-rent apartments
Construction Company
- Roberts Co
Project Value
- $235mil
Developers
- Investa and Oxford Property Group partnership
Info
- Facilities: 275 car parking spaces, gymnasium, co-working space, private dining, lounge and games area, rooftop basketball court
Project 2
- Location – Preston
- 18-storey build-to-rent tower
- 174 apartments
Developers
- Altis Property Partners and Aware Real Estate / Aware Super
Info
- Aware Super is the country’s third largest industry super fund and has decided to start investing in affordable housing
- Aware has 500 rental apartments in its portfolio and another 1,200 in the pipeline
- Tenants targeted are essential workers eg. nurses, police etc
- 1,626 sqm of retail, 198 basement car parks
- Other Aware Super build-to-rent developments – Sydney, Perth and Canberra – approximately 1,000 apartments in total
Project 3
- Location – Melbourne CBD
- 39-storey tower
- 490 apartments
Developers
- Mirvac
Project Value
- $355mil
Info
- LIV Munro facilities: gym, pool, on-site staff, co-working spaces, entertaining spaces, resident app, white goods included
- This development is complete and currently renting
- Mirvac has another build-to-rent development in Sydney which was completed two years ago with 90% occupancy attained
Brisbane build-to-rent projects
Project 1
- Location – Fortitude Valley
- 37 storey tower
- 443 build-to-rent apartments
Developers
- Lendlease
Info
- This is Lendlease’s first build-to-rent project in Australia
- Construction is expected to start this year
- Facilities: lap beach-style pool, recording studio, dog wash facilities, fitness and gym rooms, co-working facilities, resident lounges
Project 2
- Location (proposed/DA) – Woolloongabba
- 12 storey build
- 130 build-to-rent apartments
Developers
- Stalcaire Pty Ltd
Info
- Comprising of two and three bedroom apartments
- Includes 15 units for residents with a disability – NDIS compatible
- Socially inclusive mixed use residential
- Direct proximity to shopping centre (soon to have a $750M transformation by Vicinity Centres), major hospital, Gabba stadium / Brisbane 2032 Olympics
- Column elevated build with an urban landscaped ground level for the local community
- Rooftop garden, building veiled with vertical gardens, sustainable (solar, rainwater tanks etc), 167 carparks
Brisbane news
As part of its Sustainable Growth Strategy, Brisbane City Council has introduced changes to allow residential buildings in certain parts of Brisbane (South Brisbane Kurilpa Precinct at this stage) to reach the 274 metre limit as determined by aviation safety regulations. These changes will help meet rental demand in the lead-up to the Brisbane 2032 Olympic Games. As a part of these changes, the council will fast-track build-to-rent developments, along with incentivisations such as a reduction in upfront costs by permitting infrastructure charges to be paid over time.
Read about the latest Queensland government announcement regarding tax breaks for developers who incorporate affordable housing into build-to-rent projects.
Sydney news
In Sydney, in recognition of the rising interest in build-to-rent opportunities, hotels are being sold and converted. According to CBRE data and the Urban Developer, ‘the strong performance in the hotel asset class was due to firm yields, unsatisfied capital and a scarcity of quality purchase opportunities’.
What else is happening? Co-living
Alongside build-to-rent, another alternate model for new rental dwellings, known as co-living, has emerged. According to the NSW government, ‘co-living housing provides a compact, ready-to-occupy form of accommodation for a range of people including young professionals and key workers’.
Generally, co-living offers smaller private accommodation with extensive shared facilities, whereas build-to-rent tends to be full-sized apartments with a bedroom, kitchen, bathroom and living room. Therein, co-living may involve shorter stays of 3 months plus for people such as nurses or visiting professionals, whereas build-to-rent apartments tend towards longer term stays over a few years as a home.
In Woolloongabba, Brisbane, Brightlands Living has planned a 14 storey build containing 57 co-living units (the majority two bedrooms, along with 15 disability units). The building will cater to a broad range of tenants, from co-living to NDIS and traditional apartments. The cost of internet and utilities will be included in the rent, along with being fully furnished.
Developer Good Housing has proposed a 15 storey, 72 apartment co-living development for Newcastle West, which will contain private rooms, communal kitchens, dining rooms and lounges.
Summary
The build-to-rent model in Australia is still relatively new but is steadily gaining momentum due to a growing rental population, in particular, to help meet housing shortages and affordability challenges.
From our perspective, it is a space to continue watching as there is the potential for many construction job opportunities to be created, especially if global trends are anything to go by. In addition, the fact that large superannuation institutions are already investing in the build-to-rent model is also a testament to the continuing growth of this asset class.
(Sources: The Urban Developer 2022/23; Financial Review 2022; Realestate Source 2022; Brisbane Times 2023; Brisbane City Council 2023; Urban Living News 2022; NSW Department of Planning and Environment 2023)
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