Podcast
THE PROPERTY DEVELOPMENT REVIEW
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JESSE RADISICH
With Rob Langton
DIRECTOR - CAPITAL MARKETS, JLL VICTORIA
Joining our podcast series to share his unique perspectives on the state of Melbourne’s property development sector is Jesse Radisich, Head of Development Site Services at JLL.
capital. Melbourne has become a major focus and investment destination for BTR and Multi-Family globally at the moment. We’re seeing that the flow of capital continues to grow almost weekly at this point. What are some of the benefits and what are some of the challenges of the BTR sector? So, there’s obviously quite a few benefits and some challenges as well – one of the key benefits I would say is speed-to-market, wherein unlike a BTS style of product where you’re trying to sell or pre-sell prior to commencing construction which can take up to twenty-four months, with BTR you can get to market almost as soon as planning approval has been received. The assets themselves, they provide a stable, long-term, and low risk income stream – so that’s why, globally, they attract such major capital sources because of their low-risk nature. With a BTR project, you can also be nimbler in terms of price adjustments – so, in contrast to an office building where you might have a ten-year lease with further options built in, it’s more similar to the hotel model where you can adjust pricing relatively instantly as market fluctuations occur – so you can adjust your income stream more quickly. The other aspect is the long-term ownership structure of the asset class that incentivises a higher quality product, given the long tenure of residents. In terms of challenges, securing suitable sites is perhaps the most significant issue, and I’d say that’s a challenge across the board. Our team at JLL is handling quite a few of the major build-to-rent site sales currently and given they don’t grow on trees, they’re somewhat quite difficult to come by – the proof of concept is still being established. It’s still in the early days of BTR in Melbourne and in Australia and whilst there’s a handful of operational assets now, we’re still getting a sense as to how they’re performing & how they can be improved to enhance their operational efficiencies.
What’s the current state of play from a development perspective in Melbourne? Well thanks for having me back on the podcast, it’s always great to be here & to work with the Ready Media Group team. To be honest, it feels like we’ve really seen it all over the past few years as we’ve come out of the Covid period – we’ve obviously had a residential market that has boomed but it’s fallen back quite a bit since then and now appears to be in a recovery phase. Of course, we’ve had rising inflation and the impacts of that from a cost perspective, primarily through the construction sector – added to that, we’ve had a hit to consumer confidence across the board which is leading to a recalibration across the market. On a more positive front, we are seeing revenues start to increase across the board as the minimum sales requirements to make projects viable increases – and I think progressively, the market’s just going to have to absorb this. You know, all of this is making life difficult for developers, though I think it’s fair to say, we’re all in the tent together trying to make it happen – there’s huge pressures to get supply into the market given we’re facing a huge housing shortage. In terms of activity, we’ve seen a 77% drop from Q1 2022 to Q1 2023 for development sites valued north of $5 million in the inner ring suburbs of Melbourne. Let’s talk about build-to-rent (BTR) – how have you seen that sector has impacted the development landscape here in Melbourne? It’s definitely propped up a lot of the market over recent years – I would say given some of the challenges that exist in the BTS sector, it’s provided a solution and another avenue for site-owners who own major land parcels in key locations throughout Melbourne. So it’s certainly aided transaction volumes – I’d say more broadly, it’s really put Melbourne squarely on the map for global
June / July 2023 – 9
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