[+] 2023: The Year Build-to-Rent Comes of Age

Build-to-rent is no longer nascent, it’s here. 

And it’s the cat’s whiskers, according to one of its four-legged residents Munroe, who calls the LIV Munro at Queen Victoria Markets in Melbourne home. The feline and his humans were among the first to move in when it completed at the end of last year. 

While the hordes of would-be renters queuing for inspections across most capital cities made headlines recently, it speaks to the wider problem—the long-forecasted apartment shortfall. 

This is the year build-to-rent will really hit its straps, according to those in the industry who say the fundamentals underpinning it are crystalising in the market. 

A recent Centre for Population statement revealed that net inward migration was on track to rebound to pre-pandemic levels of about 235,000 people a year.

And the good news is that about 75 per cent of migrants that land in Australia rent before slowly moving to home ownership.

Charter Keck Cramer research demonstrates that migrants also import their living preferences with many opting for high-density apartment living and build-to-rent. 

In 2022, national house rental prices increased 7.5 per cent and apartments skyrocketed 9.5 per cent, amid shrinking vacancy rates. Nationally in December the vacancy rate was down at 1.3 per cent with expectations this would shrink further in January of 2023. The shortage of rental dwellings across Sydney, Melbourne and Brisbane highlights the mismatch between supply and demand in the market. 

All the fundamentals are there—the problem will be getting these projects to stack up and attract financial backing, as lenders grow increasingly wary in the current climate.

Mirvac has been one of the early movers in build-to-rent, developing the LIV Indigo project in Sydney Olympic Park more than two years ago, to strong demand. It has been about 95 per cent occupied during the past 12 months. 

▲ Mirvac’s Liv Indigo in Sydney was an early build-to-rent to come to fruition.

And taking an iterative approach to their developments, Mirvac general manager Ange Buckley says they used learnings from Sydney and applied them to their recently completed LIV Munro project at the Queen Victoria Markets precinct. 

“The sector is really emerging now and we’ve been really privileged to be up and running in Sydney for two years,” Buckley says. 

“It’s given us an opportunity to future-proof and understand changes in the way people live in a live context, which has informed our newer build-to-rent offerings and enabled us to meet demand.”

Mirvac has a $1-billion build-to-rent pipeline under construction, including an additional two in Melbourne, LIV Aston and LIV Albert Fields, and LIV Anura in Brisbane. 

Mirvac’s outgoing chief executive, Susan Lloyd-Hurwitz, is calling on all levels of government to back the sector.

“Build-to-rent … is one of the best solutions for the housing supply deficit we are facing,” Lloyd-Hurwitz says.

“Governments recognise that supporting this sector to become established means there will be more supply which is a huge economic benefit to our cities.”

While LIV Munro includes the usual pool-deck amenities, gym and yoga room, it takes it one step further. It provides a podcast studio, entertaining spaces for large dinner parties with full commercial kitchens, large rooms with televisions for screening parties and fully kitted out co-working spaces. 

“[Amenities] are one of the key pillars that can differentiate a build-to-rent from an apartment development. We take a really human-centred and granular approach to the design of the buildings,” Buckley says. 

▲ Build-to-rent is not about replicating luxury hotel amenities, it's about building a sense of belonging, according to the head of build-to-rent at Mirvac.

Buckley says developing a sense of community within their build-to-rent developments has been a key learning through the iterative process of creating build-to-rent towers. She says there is a greater customer satisfaction when residents feel like they belong, which also feeds into tenant retention. 

But she warns it’s not something that they create. She says it’s about creating the space for residents to develop their self-sustaining communities organically.

Collective living thrives

From podcasts to entrepreneur groups and barks and beers events, the notion of collective living is alive and well across vertical communities. 

Mirvac is on target to deliver 5000 build-to-rent apartments that are operational by 2030. 

Institutional developers with deep pockets are getting out of the ground in the sector, but new players are also entering the fray. 

Late last year Vita, headed up by Asher Capital chairman Andrew King, TKM Capital managing director Tim Mahony and Atira Student Living founder Damian Haber and backed by local super funds, announced its intentions to build an affordable build-to-rent development in Brisbane’s Fortitude Valley, targeting families, key workers and over-55s. 

The project is slated for construction this year, and is one of two in the portfolio, which is aimed at creating a national portfolio of about 4500 build-to-rent apartments. 

More than 600 apartments are planned for the site at 186 Wickham Street, Fortitude Valley, while a further 500 apartments are mooted for a city-fringe site in Brisbane. 

Savills Australia’s build-to-rent market report shows the sector chalked up significant investment activity over the past 18 months. There are about 3800 dwellings in the build-to-rent sector with a further 8400 units under construction, and a pipeline of 22,5000 units waiting in the wings.

The five biggest players according to pipeline commitments are Home, Mirvac (LIV), Greystar, GQ (Gurner Qualitas) and Indi. 

The sector is estimated to be worth $9.6 billion in 2027, and the only way is up as shovels hit dirt in 2023.

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