Better Living by Design

Build-to-Rent ramping up in Australia

Grocon has started a build-to-rent project, following Mirvac and advancing the sector. As predicted, we'll see this expanding, but it also need to be in suburban areas where it can be more affordable.
The Australian just reported:

"It’s taken a property deal with the AFL on a plot of land next to Melbourne’s Marvel Stadium to really spark the public imagination about the promise of the country’s build-to-rent sector.

The transaction revealed this week means footy fans could soon be living on the stadium’s doorstep after developer Grocon picked up the site next to the venue in a $67m deal.

The company, led by Melbourne property scion Daniel Grollo, has quietly emerged as the leader in the new property arena and it has bought up sites around the country to build apartment blocks to rent out units rather than sell them off.

It has two more sites in Melbourne and another two in Sydney under its wing after winning the backing of Singapore’s sovereign wealth fund in the area. But it is keeping its plans under wraps for now. The AFL deal is just a marker of the wave of new-style towers being built with the projects now being pitched as one of the few areas of property not being torn apart by the coronavirus crisis.

The notion of build-to-rent has been kicked around for several years by developers but they were often bogged down by complaints about investment and tax structures. Now many are simply getting on with it, with Mirvac at the vanguard of listed companies getting into the area.

The company is already building in Sydney, with Melbourne to follow, as it aims to get to 5000 units that it says offer long-term renting which make them akin to ownership.

“When it opens in September, Mirvac’s first project, LIV Indigo at Sydney Olympic Park, will offer residents both the flexibility of renting and the certainty and security traditionally associated with home ownership,” Mr Hirst said. The projects also fit the official demand for “shovel-ready” work that won’t be tied up for years trying to get finance.

“At a time when Australia is looking to construction to revive the economy, build-to-rent projects will turbocharge our recovery as they don’t require pre-sales and are therefore truly shovel ready,” Mr Hirst said.

The pandemic appears to be putting it on the map for more developers. “COVID-19 may in fact see a swing in investment to build-to-rent with apartment pre-sales becoming difficult,” Mr Harris said. There could also be a switch on the demand side with potential homebuyers more interested in renting.

....The sector has some doubters. Luxury apartment tycoon Tim Gurner recently warned that drawing large companies into the area could hurt smaller investors. But the impact of major players, including US giants Blackstone and Greystar, is yet to be tested as their projects are yet to launch despite their initial sites being selected. There is also a wide range of products being developed in major cities, making it hard to generalise.

Canada’s Oxford Properties Group is getting its first development under way in Sydney’s central business district, lodging plans for a luxury 39-storey build-to-rent residential building above the new Sydney Metro Pitt Street station.

At the more affordable end, the NSW government is advancing plans for a Communities Plus build-to-rent project in inner-city Redfern and its plans will be considered by Sydney council next week. Private sector operators will come in to fund, design, develop and manage buildings rising up to 16 storeys under a long-term lease. Three developers have been short-listed since early 2019. But other projects are already under way. And the big end of town is backing them.

Morgan Stanley analysts Lauren Berry and Simon Chan visited Mirvac’s 350-unit project in Sydney Olympic Park. They left impressed with the apartments and amenities but a little concerned about whether it would stack up.

Rents are 10-15 per cent above the surrounding market, and they said Mirvac may only just achieve its 4.5 per cent-plus yield on capital target." Full Article

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