As Build to Rent continues to grow in Australia and New Zealand, this new and emerging market highlights the political and social aims of the nascent sector to key stakeholders.
The categorisation fosters government support and encourages investment at scale where product has yet been built sufficiently to meet demand, JLL found.
Therefore, there is not yet an actively traded investment market for stabilised Build to Rent assets in Australia.
Despite the limited size of the market, capital raising activity has been strong.
JLL estimates that USD$6.5bn of equity has been raised by major operators for Australian Build to Rent strategies to date, while there are also several active capital raisings underway at present.
This capital is focused on develop-to-core strategies with some one-off project transactions.
Activity in the Build to Rent and broader living sectors has been considerable, and since the beginning of the year, there have been several major transactions.
Amongst these include the Lendlease and QuadReal joint venture partnership in Brisbane, the fund-through partnership between Lendlease and Daiwa House for AUD$650m and the Mirvac Build to Rent venture that is raising AUD$1.8bn to re-capitalise its portfolio of five completed or under-construction assets.
JLL anticipates that both transactional activity and capital raising activity in the sector will accelerate in 2024 as developments start to reach completion and stabilise, and investors continue to become more comfortable with underwriting investments in the sector as the interest rate cycle reaches its peak.
Furthermore, it expects further clarity will emerge on the Federal Government’s decision to reduce the withholding tax rates for foreign investors in MITs from 30% to 15%, which will allow investors to factor this change into the underwriting considerations.
It is also expected that more fund-through deals will emerge over the next 12 months.
Build to Rent development applications have also surged, with numerous of these groups already being flagged or are likely to look for a fund-through transaction. This will allow them to capitalise on the current strong case for Build to Rent development and earn a development management fee.
For major Build to Rent platforms, it could also achieve a desired result of eliminating some of the development risks.
