Colliers build-to-rent head Robert Papaleo isn’t mincing his words. Standing before an audience of sector specialists in Melbourne, Papaleo says the Australian build-to-rent market is maturing— and that it needs to. And what it also needs are institutional investors. But, he tells The Urban Developer’s Build-to-Rent Summit, developers and platforms need to think outside the box. Capital sources “There’s a limited depth of capital to support the upfront development,” Papaleo said. “That’s private equity, real estate investment, that is going to be pretty hungry for a very high return, and it’s going to be expensive.” He explained that many investors were more keen to invest once they saw something being built or after the completion and stabilisation of a project. Now, what he expects to see is more developers and platforms exploring alternative capital sources and strategies—the employment of different sources of capital throughout a project lifecycle. “Clearly there’s opportunities now for developers to start thinking, or platforms to start thinking, about how they can respond better and create products and create opportunities for the influx of capital at different points through a project or an opportunity,” Papaleo said. He also predicted more trading of core assets, more recapitalisation and more consolidation in the build-to-rent market. ▲ Colliers’ Robert Papaleo speaking during The Urban Developer Build-to-Rent Summit in Melbourne. Papaleo expects to see changing partnerships. “We’re starting to see that historic partnerships between capital and their local platforms may begin to shift, and we are certainly hearing different groups speaking with different parties, and that’s to be expected as this asset class matures, and no one’s hiding from that, which is great,” Papaleo said. Melbourne and Sydney accounted for more than 45 per cent of population growth nationally in 2024—Papaleo said institutional investors would follow that trend. “Australia has this unique circumstance where 40 per cent of its population live in two places: Melbourne and Sydney,” Papaleo said. “My point is that gravity attracts capital.” “The critical mass of Melbourne [and] Sydney just cannot be understated. “It’s going to continue to drag capital to it, because capital wants the safety of liquidity and depth of the secondary market.” But key to investors confidence in the build-to-rent market will be the ability to complete and transact assets. “This year, hopefully we’ll continue to see a number of assets that are complete or near complete and stabilised begin to transact, to give evidence to the broader sector and confidence to investors that this emergence of the built-to-rent market in Australia is real, is sustainable, is supportable, and does generate great returns on a risk-adjusted basis,” Papaleo said.  A wider net Papaleo said there were still opportunities if build-to-rent was not thought of as purely CBD-based apartments. “If we take apartments as a segment of the Australian housing market, it is not the main game,” Papaleo said. “The reality is that the heavy lifting of Australia’s new housing supply comes from the greenfield markets, and from the established suburbs, and the small army of builder-developers out there doing the small-lot subdivisions. “The volume of new housing created by knockdown, rebuild, conversion into three, four townhouses is considerable.” ▲ Greystar’s The Gladstone in Melbourne is Australia’s biggest build-to-rent development to date ( also pictured top ).   He also thinks if developers don’t look at locations outside the CBD, as well as different housing types and products, the market will hit a ceiling soon. “We’re going to hit a buffer ... fairly soon and that then goes to the opportunity for an alternative product to find a different growth rate going forward,” Papaleo said. “At the larger product end ... we’re already quite close to that ceiling, but maybe there is more headroom for growth in those smaller product types and in different locations as well.” Papaleo also said that Australia was coming off a peak of population growth as it corrects for the dip in 2021. But, he said, it was key to remember who was counted in the Australian Bureau of Statistics data. “We need to appreciate that they do not include the temporary residents,” Papaleo said. “So there’s a much higher level of housing demand created beyond simply population growth, as counted by the ABS.” That includes a lot of international migrants from temporary workers, key workers, highly skilled workers and international students that are often keen for build-to-rent housing. Papaleo expects the demand for singles and couples to grow. However, he said, with supply in the market so low currently, any completed assets had an advantage. “Completed assets will now have a more open dancefloor to attract new renters,” he said, attributing the dancefloor analogy to Sentinel’s Georgina Duckworth.  “The challenges is for private investors to properly manage and offer good value for money to well-informed customers.”
