Lendlease taps Nippon Steel to back $500m Docklands rental tower as Japanese target housing

Lendlease and Nippon Steel Kowa Real Estate will develop build-to-rent apartments at 899 Collins Street in the Docklands.

Japanese investors have continued their surge into the property sector, with Nippon Steel Kowa Real Estate striking a deal with Lendlease to back a $500m build-to-rent apartment development in Melbourne’s Docklands precinct.

The move comes in the wake of another large Japanese company, Sumitomo Forestry, buying a majority stake in Australia’s largest home builder, Metricon, and other major investments in the country’s housing and logistics markets.

Japanese investment has surged back into Australia as major companies seek alternatives to their low growth home market and this market is seen as wealthy, safe and stable.

They have also made the running in commercial property with Japanese groups taking stakes in office towers and industrial parks, as well as build-to-rent where Japan’s Mitsubishi Estates Asia has taken a stake in Mirvac’s build-to-rent operation and is backing the 5000 unit portfolio being assembled around the country.

Japanese support in the emerging build-to-rent sector is also a shot in the arm for the build-to-rent sector, which has been quiet this year as developers have struggled to make projects stack up amid higher interest rates and soaring building costs.

Lendlease and Nippon Steel Kowa Real Estate said the deal was the first partnership between them and would see them develop a waterfront build-to-rent apartment complex at 899 Collins Street in the Docklands.

Under the terms of the partnership, the Japanese company will take a 40 per cent equity share in the build-to-rent venture. Lendlease will seek to bring in additional partners as the project progresses.

The deal is the first local play by Nippon Steel Kowa Real Estate. In Japan, it has operations across developing and leasing office buildings, condominiums for sale and logistics in addition to luxury rental condominiums.

Lendlease will develop, construct and act as the investment manager for the project, which will be finished in 2026. The development in Lendlease’s well established Victoria Harbour precinct, and will be the third build-to-rent project by the company in Australia, with Exhibition Quarter in Brisbane, and a Melbourne Quarter development currently under way.

Lendlease has about 2,700 build-to-rent apartments being developed, in addition to an existing 2,800 managed apartments around the world. The Docklands development will add 499 units in a mix of studio, one, two and three-bedroom apartments over 24 levels.

Lendlease chief executive development Tom Mackellar said the new partnership was a “strategic opportunity” to leverage its expertise in the sector.

“This announcement also highlights the continuing demand from our Japanese partners for high quality opportunities across our development pipeline, and we look forward to working together to deliver on NSKRE’s first project in the Australian market,” he said.

Nippon Steel Kowa Real Estate managing director of international business Itaru Ishihara said the company prioritised collaborating with reliable local partners when expanding its operations overseas.

“This project aims to address the housing needs of Melbourne’s growing population, focusing on the increasingly popular build-to-rent sector,” he said.