Greystar Carves Out Build-to-Rent Market Share

Greystar, the South Carolina-based real estate giant, is quietly carving out a big share of Australia’s burgeoning build-to-rent market with interests now in three states.

The US’s biggest apartment operator announced this week it had appointed Icon to build its $500-million residential project in South Melbourne’s Fishermans Bend precinct.

With 700 apartments across three towers plus 850sq m of retail space, the project will become one of Australia’s biggest purpose-built build-to-rent developments.

But with ink on the construction contract with Icon barely dry, Greystar Australia’s managing director Chris Key confirmed they had acquired a third inner Melbourne property, on which they’ll build 450 units.

“We are working through early-stage design ahead of trying to launch a development application,” he told The Urban Developer of the as-yet unnamed location about 3km from central Melbourne.

And, while Melbourne’s build-to-rent market remains their focus, Key also confirmed Greystar was in due diligence on “a number of other projects” in Sydney and Brisbane.

“We are progressing those at the moment, there is potential there for us to significantly increase the number of apartments in our pipeline,” he said.

Key said Greystar would like to be doing a lot more in Australia.

“You pick up a paper every day and see stories about the rental crisis,” he said. “And it’s very real, the squeeze, vacancies dropping by half in Sydney and Melbourne. And in Sydney rents are up 17 per cent in the past 12 months and 15 per cent in Melbourne.

“The market is crying out for more housing.”

▲ Icon's Victorian director Dan Crawley (left) celebrates the building contract with Greystar managing director Chris Key.

Greystar’s latest development is in Gladstone Street, in the Montague precinct of Fishermans Bend, and will include more than 4300sq m of indoor and outdoor communal space. 

Designed by Scott Carver architects, the finished towers will house up to 1500 people. The developer acquired the 6000sq m site in March 2021 for $65 million.

Fishermans Bend is Australia’s biggest urban renewal project covering about 480ha in the heart of Melbourne. It is expected that by 2050 the five precincts across two municipalities will be home to about 80,000 residents and provide employment for up to 80,000 more.

Greystone’s Gladstone Street project, which is expected to begin construction in 2022 with completion about two years later, is the developer’s second build-to-rent construction in Melbourne. They got the green light for a $500-million, dual tower project in South Yarra in September last year.

Key is cautiously optimistic.

“The turn in the cycle with what is happening with the broader economy, supply side constraints, cost inflation in construction, what is happening with the reserve bank and rates, what is happening with bond rates and therefore the cost of borrowing, does make life more difficult,” he said

“And then you’re having repricing in equities and across other asset classes which will ultimately impact on real estate as well. It is a lot of moving parts to get right.

“But these products are obviously backed by major institutional investment, be it from pension funds from offshore, be it from superannuation funds, sovereign wealth funds, insurance companies.

“Some may take a bit of a pause because of volatility moving through the market at the moment, but ultimately they can’t just sit on large amounts of cash, they have to be invested.”

Key warns that over the next two or three years the for-sale housing supply coming to market will be constrained, which will favour build-to-rent.

“Take a city like Brisbane, even when it ramps back up and what’s expected in 2025 or 2026 from a delivery standpoint, it’s only half of what they were delivering back in 2017,” he said.

“In Melbourne you come off a peak where it’s probably a tenth of what they were delivering.

“So when you are institutionally backed, like we are, it takes the pre-sale equation completely off the table.

“We are going to slot into a window where I think you will see over the next couple of years build-to-rent will deliver in the apartment market in the inner to middle ring of the major cities, as much volume as the for-sale market.”