Although in its early stages, Build to Rent is fast becoming one of the most popular and progressive property assets in Australia today.
A study by consultancy firm Ernst & Young (EY), commissioned by the Property Council of Australia earlier in the year, found that Build to Rent housing is currently worth $16.8bn, but has the potential to expand by a factor of 17 to a $290bn sector. This would see the creation of up to 350,000 new apartments in an optimistic scenario.
The study also found only 11 operating Build to Rent projects, and another 72 projects are in the pipeline. Because of this, the report suggests that on conservative estimates, if the sector grew to just 3% of Australia’s residential stock, it could be worth $290bn.
As some of the early movers in the Australian market, Sentinel and Mirvac have both learnt that community is key to keeping residents happy and occupancy high. However, there is still a learning curve when it comes to the general public’s understanding of the asset class.
Mirvac’s Build to Rent lead Angela Buckley sees two types of renters coming into Mirvac’s Build to Rent properties.
“What we found, particularly in Melbourne, [Build to Rent] has really attracted quite a strong expat community. These are probably people that might have been abroad and are returning to Australia and because they might have lived in the UK or the US and they’re very familiar with multifamily, so they have a sense of relief that this category of housing is down here in Australia. But by and large, I would say that there is a lot of surprise and delight for customers. Typical Australian customers are used to renting in the private market. In saying that, I think sometimes there can be some level of scepticism to say, ‘hang on, do I get all of this’ because renters typically aren’t used to being treated as customers. The real opportunity for Build to Rent is that the renter is genuinely the customer.”
Angela Buckley, Build to Rent Lead, Mirvac
Mirvac’s LIV secured five properties in its seed portfolio, which are set to deliver close to 2,000 apartments, nearly halfway to its 5,000 goal. By 2024 – across Sydney, Melbourne and Brisbane – 3,300 residents will call LIV home.
Keith Lucas, Sentinel’s Managing Director in Australia who has lived in one of Sentinel’s Subiaco Build to Rent scheme’s in Perth, agrees there is still a learning curve of understanding when it comes to Build to Rent.
“These properties operate on retention rates, occupancy, and the sense of community that you can create around the building. The idea that renting is the sole business of the landlord and the entire focus within a building, is absolutely a different experience to what most Australians would know as the rental process. Institutions, like ourselves, and the institutional investors that are behind us hold themselves to a high corporate standard when it comes to owning and managing these buildings. There’s currently a major shortage of rental accommodation and housing across the country and not only do we want to help with filling this gap and delivering greater housing choices, but we’re focused on making sure we’re providing a consistently high level of service, high-quality product, and great rental experience across our portfolio. Ultimately, we know that in the long-term, that is what will make our properties a great place to live and support the retention of existing residents and attract new renters in the market.”
Keith Lucas, Managing Director (MD) in Australia, Sentinel
Sentinel completed Australia’s first purpose-built institutional Build to Rent development in Subiaco, Perth in 2019 and saw practically 100% of the apartments leased within nine months. Phase 2 of Element 27 opened in April of 2022 and has since achieved similar success.
They are soon to begin construction on Phase 3 of the precinct and are in planning on a fourth phase, with over 370 rental units expected to be delivered across all phases on completion.
The group aims for roughly 90% occupancy or higher at each of its apartment communities and for residents to be staying for more than one year.
“Once we get potential renters in the door, meeting those needs is generally easy for us given our well-established rental processes and professional standards of service. Even at the first touchpoint of being given a personalised private tour of the property by our onsite staff, I think that imparts how the experience is going to be for residents.”
Vanessa Healy, Director of Asset Management, Sentinel
Sentinel’s Regional Director of Asset Management Vanessa Healy said that numerous parallels can be drawn between the needs of Australians and Americans when it comes to renting.
She said residents are generally looking for transparency in pricing, security of tenure, to know that the building will be maintained appropriately, and that there will be quality amenities on offer and an easy onboarding process.
