THE PROPERTY DEVELOPMENT REVIEW
alternatives Australia Tim Holtsbaum said. The sector has attracted significant international investment, including Japanese investor Nippon Steel Kowa Real Estate backing Lendlease’s 499-unit build-to-rent tower in Melbourne’s Docklands.
“After a long delay, critical legislative reform of build-to-rent tax policy has been passed by parliament,” Holtsbaum said. “This signals to foreign investors that the Australian government supports and recognises build-to-rent as an important component of future housing supply.”
Victoria’s build-to-rent market remains the market leader, but Melbourne investors are eyeing markets further north, the report said.
The Westmead development, featuring 397 apartments across three buildings, represents part of AXA’s $4-billion global portfolio.
In Brisbane, the Ontario Teachers’ Pension Plan and Hines have acquired two build-to-rent assets from ADCO, including an 89-unit operational asset in Fortitude Valley and a 265-unit development in South Brisbane scheduled for completion in the first quarter of this year. Development challenges persist, particularly in Brisbane, where new-build supply is expected to lag Melbourne and Sydney in the short term. The report said that while larger platforms may consider diversifying into tier-two locations in the future, the focus remains on the Big 3: Melbourne, Brisbane and Sydney. According to the report, the sector’s seasonal nature influences operational strategies, with peak tenant activity occurring in January and February. Also, operators are more commonly offering incentives, such as a month rent-free, to accelerate lease-up rates, particularly during quieter periods. The market faces ongoing challenges, the report said, with investment volumes in 2024 affected by the broader macroeconomic environment and government policy uncertainty. Build cost inflation continues to pressure development feasibilities, although construction costs are expected to stabilise. Recent policy developments have also boosted sector confidence.
AXA IM Alts’ entry into the Australian market through Deicorp’s Westmead project in Sydney is an example of growing institutional interest in both premium and affordable build-to-rent segments. “Australia is a great geography and we have strong conviction that affordable build-to-rent will provide a strong risk- adjusted return on investment,” AXA IM Alts head of Australia Antoine Mesnage said. The report anticipates strong demand for operational build- to-rent schemes in the coming year, driven by scarcity and appetite for income-producing assets. Stabilising construction costs are expected to improve development feasibilities and reduce perception of development risk. Major build-to-rent projects under construction and due for completion between late 2024 and 2026 include Greystar’s $500-million South Yarra development to Lendlease’s Melbourne Quarter towers.
February / March 2025 – 27
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