[+] Investors Play Defence as Worker Proximity Powers Asset Value

Owning the biggest hospital, office, shopping centre, airport or factory means little in terms of asset value if it is impossible to operate it to capacity. That reality is why multibillion-dollar Australian insitutional investors are looking to upgrade their portfolios and fix the issue, putting capital towards such sectors as affordable housing. And while the cost of living may be affecting doctors, lawyers and executive officers, people living on less than $70,000 a year are as important to a city, providing services that cover a wide range, from cleaning to catering to culture and more. The housing crisis is hurting virtually every pocket and the solution is not just what the government can do but what capital and companies can do as they shore up their portfolios. This is because the sum of assets is far greater than the parts, particularly for affordable housing and affordable build-to-rent. Super Housing Partnerships chief executive Carolyn Viney said that once large-scale investors started moving, they would scale and ultimately it was a defensive move. “The property development industry in Australia is incredibly innovative and if we can get the long sight on where it can get to and navigate that, we’ll find solutions,” Viney told a roundtable session at The Urban Developer’s Ubanity 23. “One of the things that is driving the Australian super fund interest in build-to-rent and affordable build-to-rent in particular is their exposure to all the other assets they own around Australia that need people on low and middle incomes to populate them. “[For example] If there is no one—I don’t mean doctors and I don’t even mean nurses—if there is no one to clean the rooms, there’s no one to clean the equipment then surgery is only operating at 20 per cent capacity. “So, there’s a level of sophistication in their investment mandate that’s saying, actually, with all these other assets I need a defensive play to make sure that key workers are roughly located in that geography. “If that person lives here, 5 or 10 minutes from the hospital, they can pick up an extra shift, they can work overtime and they can increase how much they own. ▲ Carolyn Viney during an Urbanity 23 panel discussion. “If they live an hour away and the train only goes every 40 minutes, what is the likelihood that they are picking up overtime?” Lighthouse Infrastructure managing director Peter Johnston says they have noticed a big shift in the capital market’s interest in affordable housing in the past five years. “Now in pretty much every superannuation fund in the country I can identify, by name, whose responsibility it is for looking at affordable housing,” Johnston says. “How much capital have they mobilised at this stage? Not much but the change in interest, the application and people’s attention has increased substantially, literally from zero. “If you look back 10 or 20 years, most institutional portfolios comprised solely of office and shopping centres, they were easy to hit and they were big targets. “These sectors face significant headwinds with the internet … so now we can shop from home and work from home. “Yes the office is still there—but will we be hot-desking in five years? “It doesn’t take a genius to work out what the demand is going to do. You’re currently working from home so you don’t need an office but you probably need an office at home. “The most obvious progression to us, and it seems the Europeans have already got there, is—right, you’re shopping and working from home, so we have to invest in your home. “All real estate assets are really capital intensive so it’s a good place for capital intensive industries and a really good place for institutional investors.” ▲ A big shift in the capital market’s interest in affordable housing, Lighthouse Infrastructure managing director Peter Johnston says. Johnston says this capital interest could redesign cities, and inclusionary zoning to add incentives for affordable housing can provide opportunities. This happened in NSW in June, where residential developers with at least 15 per cent affordable housing gained a 30 per cent height bonus above local environmental plan limits. However, to move ahead developers needed capital, security and an understanding of who would buy the product in order to deliver it. “Most of it was previously taken by the community housing sector, which is poorly understood in Australia,” Johnston says. “They are Australia’s biggest landlords.” One provider, St George Community Housing, is bigger than the entire build-to-rent sector, providing homes to 11,500 people across 7000 in Sydney. According to a 2022 report by Ernst and Young, while the build-to-rent sector has 23,000 apartments on the books in Australia, only 3900 are completed. “These guys [SGCH] are already utility scale but they are charities which means they don’t have access to their own capital,” Johnston says. “We’ve just been able to create a structure where we can inject our capital and capability into these sectors and make them work. “Smoothing the path to the injection of capital is what is going to make inclusionary zoning work because you can only do this if someone turns up to buy it and that’s our path. “The community sector has previously relied on grants from the government and they’re budgetary allocated not deal allocated. “We believe our role in the ecosystem is supporting developers to have the capacity and confidence to build project.” Viney says private capital is required to solve the housing crisis and in order to maintain the attractiveness of Australian housing, policies also had to be adjusted. “I’m buoyed by the fact there are lots of people focused on affordable housing in Australia and I think if the money wants to come, and we get those settings right for the money to come, we won’t be having these conversations on who builds these homes next, because everyone will be doing it.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. 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[+] Investors Play Defence as Worker Proximity Powers Asset Value

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