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However, that build-to-rent growth is just the tip of an investment iceberg. We expect to see scores of purpose-built build-to-rent apartment complexes that will offer tens of thousands of new dwellings along Australia’s eastern seaboard in the next three to five years. For example, last month JLL sold an ageing hotel at 6-9 Queens Road – opposite Albert Park Lake – to build-to-rent developer Home, which is backed by a major offshore sovereign wealth fund.
AustralianSuper is backing the development of new build-to-rent projects in inner-suburban Brunswick, Coburg and Fitzroy. Credit: Nine
It plans to demolish the hotel and build a $225 million, 560-apartment complex for long-term rental. Home also recently completed build-to-rent projects in Richmond and Southbank, and the development pipeline includes assets in Docklands, as well as Parramatta, St Leonards and St Peters, in Sydney.
The majority of specialist build-to-rent players are backed by local and international institutional investors. However, there are also privately owned groups with large potential pipelines.
There are obvious benefits in this new form of housing supply for renters, and the sector also suits larger investors, given the dynamic rental pricing models and high occupancy when compared with other properties assets, such as office, retail and industrial.
With relatively short leases, build-to-rent allows owners to capitalise on potential strong rental growth and partially hedge against higher inflation.
As challenges mount for local commercial property developers, the timing for build-to-rent groups to pursue larger, inner-city landholdings has never been more opportune. Forward-thinking developers and build-to-rent operators are already beginning to form strategic partnerships.
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To a large extent, build-to-rent reduces the risk for developers by removing the need to find multiple buyers and selling apartments in one tranche. In the UK, where the build-to-rent sector is far more mature, specialist property developers now build apartment towers for build-to-rent operators.
The solution to the rental crisis won’t come easily – or quickly – but as build-to-rent moves from a niche product to the mainstream, it will pave the way for more diverse housing options for our rapidly growing population.