[+] Lendlease Boss Backs Build-to-Rent in Housing Downturn

Hot on the heels of announcing its first build-to-rent development in Australia, Lendlease chief executive Dale Connor says his money is on the growing asset class as interest rate hikes wash through the housing market. Speaking at a Property Council event in Brisbane recently, Connor said Lendlease would execute on a number of other sites across Australia to add to the developer’s build-to-rent pipeline in the next 18 months. Lendlease has delivered more than 2600 residential-for-rent apartments globally, with another 1500 under construction in Chicago, New York and London. Lendlease’s global build-to-rent pipeline is worth about $28 billion, and now the developer is bringing its build-to-rent experience to Australian shores. Earlier this month Lendlease announced it would be developing a 443-apartment build-to-rent tower across 37 storeys . “We think this is the first of many projects that we will hopefully launch in the next 18 months at some of our development locations. But it’s a construction equation, and a planning equation, and the speed at which you can get there,” Connor said. “We’ve got a strong legacy in multi-family internationally. It’s been a strong product for the past decade in Europe, the UK and the US. It’s natural for us to think about the multi-family product in Australia.” ▲ Render of Lendlease's planned Australian build-to-rent debut development earmarked for Brisbane's RNA Showgrounds precinct in inner-city Fortitude Valley. Connor says Lendlease will target premium rental markets in its Australian build-to-rent platform, after securing the backing of QuadReal Property Group. “We have launched our first BtR product here at the RNA in Bowen Hills, on the back of a deal with QuadReal as our investor, who understands multi-family product, who understands what the product is about, what the returns are about, and what the long-term opportunities are about,” he said. Inflationary pressures and interest rate hikes are flowing through to the housing market, with economists predicting a fall in house price values that could all but wipe out the pandemic gains. ANZ senior economist Felicity Emmett says it will be a “challenging year for everyone” with forecasts for a peak of 3.85 per cent cash rate this year and a “very real risk that the cash rate goes above 4 per cent”. Emmett says the strong performance in the rental market and underlying population growth should drive investors back into the market and provide solid foundations for build-to-rent. But Lendlease’s chief executive says it’s not just about the thematics. Connor says there are more practical concerns constraining the property sector’s pipeline. “It’s the equation between cost and revenue and it doesn’t work in a lot of places, it works on Sydney Harbour, but it doesn’t work in the suburbs of Brisbane,” he says. “I’m a big believer in mutli-family build-to-rent. It really is about where the transport nodes are, thinking about state infrastructure, growing density and growth and development and cutting out planning issues and getting on with it. “The key is always location, but the strength of that investment profile coming in. We think of BtR is a premium product. There’s obviously lots of super funds that think of it as a discounted product and that’s great because it helps the housing equation as well. But for the likes of ourselves and others it’s about trying to find those locations where we think premium can be gained from the service, the amenity that is going to be provided.” South-east Queensland developer Consolidated Property Group’s chief executive Don O’Rorke says the cost of building apartments does not stack up in more urban areas. ▲ Consolidated Properties' approved project at the former ABC Site. “The biggest single problem we have is construction, it’s very hard to build things at the moment because of the strong demand for our services,” O’Rorke says. “Hutchies does all of our construction … as of today they are still factoring a 1 per cent per month escalation. “We can’t produce an apartment for under $12,000 per square metre. Really what that number is suggesting is that the only new starts we’re going to get are in the inner-city, and there’s certainly not capacity to service the demand that is there.” ANZ’s Felicity Emmett says there are about 800,000 fixed-rate home loans unwinding this year, which she says is “significant”. Emmett says this will have a limiting factor on loan serviceability and discretionary spending into the future, but says she expects Queensland to outperform all other states in 2023. You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Lendlease Boss Backs Build-to-Rent in Housing Downturn

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