Trading places: big capital chases the housing dream
Mason & Main by Nation. Picture: Supplied
The nation’s top developers and global funds managers are pouring billions into large-scale residential sector as governments urge the property sector to step up and play a greater role in solving the housing crisis.
The big shift towards the living sectors is playing out with investment pouring into build-to-rent, student accommodation and the new land lease sectors.
While each segment is addressing a different need, the burgeoning population and demographic surge across key markets means developers can barely keep pace with the demand for accommodation.
In one of the largest moves, the private Coronation Property has set up a new unit to house its expanding build-to-rent operations and claimed a position as one of the largest players in the country with units actually open in Australia.
The move is being matched by the inflows of capital into student accommodation, with US investment house Nuveen taking a stake in The Switch as it looks to expand its holdings in Australia.
Industry veteran Nick Collishaw – a former Mirvac chief executive – is also forging deeper into the sector with acquisitions, taking the Lincoln Place business he co-owns to more than 3300 home sites under operation and development.
The moves come amid the national housing crisis which is hitting as immigration surges and housing supply looms, with institutional capital moving being pushed to be part of the solution.
Institutions are now pouring billions into co-living platforms as the housing crisis brings the high returns on offer into sharper focus.
The big tax changes in the Albanese government’s May budget, along with incentives from state governments, have prompted a surge in BTR projects in the face of a nationwide rental crisis, according to JLL’s latest BTR market update.
The agency said the number of specialist apartments under construction jumped by 65 per cent over the first eight months of 2023, while the number approved awaiting construction increased by 15 per cent. The planning pipeline also leapt by 78 per cent.
“Build to rent residential is far from a cure-all … but it is clear it has to be a big part of the longer-term strategy to address these pressures,” JLL head of residential research, Leigh Warner, said.
While the pick-up in the area is clear, it won’t make much of a dent on housing shortages as traditional projects have stalled. Some developers are shifting rapidly into BTR.
Sydney-based Coronation has launched a subsidiary, Nation, focused on operating a pipeline of new specialist towers.
Coronation managing director Joseph Nahas said it was on track to be one of the largest BTR operators in NSW, with a projected 1500 available across three Sydney sites by 2025.
“We’ve established Nation as a stand-alone business to specifically meet the growing demand for secure, flexible rental solutions in a Sydney market which has become increasingly inaccessible for a vast number of renters,” he said.
Charlie Parker by Nation.
Nation will soon launch its first two BTR projects, starting with the Charlie Parker estate in Harris Park designed by architectural practice FJMT, shortly followed by Mason & Main in Merrylands, which will become the largest BTR project in NSW with 450 apartments.
The project will open in 2025 and Nation is also planning to run about 800 BTR apartments in Coronation’s $1.5bn Erskineville mixed-use precinct.
Mr Nahas noted the importance of housing the growing number of essential workers who are now unable to afford to rent quality homes in neighbourhoods near their jobs.
“It’s unacceptable that essential workers are forced to travel over an hour to-and-from work each day,” he said.
Coronation has developed almost 2000 units and has a $3.2bn pipeline in design, development, and construction. The company is planning to develop more than 9000 new homes to the Sydney market by 2027.
The company stands out in the sector for getting projects up and running in Sydney at a time when many rivals are still stuck in planning.
One way around is private developers offering up their projects to cashed-up institutions.
Nuveen Real Estate partnered with Flinders University on The Switch, Adelaide Central.
Coronation is behind The Paper Mill precinct fronting the Georges River in Liverpool and has developments underway in Parramatta, Ashbury, Erskineville, Chatswood, and Moorebank.
China-based developer Run All International is looking for a forward partner to take out the build-to-rent component of its site in Melbourne’s Southbank. Run All has applied to develop 455 BTR units which would sit atop a 346-key luxury hotel and is seeking a partner via broker Franklin St.
Franklin St principal Edward Quinn said an incoming investor could appoint one of the big operators who have swept into the market to run the asset when it was finished in 2027.
“The build-to-rent market has the scope – if we look at the US investment market – to be bigger than the commercial office side,” he said.
Mr Quinn said the local market was passing through its first phase as multiple platforms entered Australia. “What we are now seeing is phase two of more passive capital looking to get into the market,” he said.
Big players are already swooping on the student side with Nuveen Real Estate extending its partnership with local student accommodation provider, The Switch, by taking a strategic stake in the business, which had outlined plans to assemble a $900m portfolio over the next three years. Its operations include the 347-bed The Switch, Adelaide Central, and The Switch Perth Central.
A third project, The Switch Melbourne, Victoria Markets, opened this year, to be followed by the 250-bed The Switch Sydney, Kensington, near the University of NSW.
Nuveen is a major player in student accommodation offshore, and Nuveen Real Assets CEO Mike Sales said the company was committed to growing in Australia.
“We currently hold three operational purpose-built assets in Perth, Adelaide and Melbourne, which have all demonstrated strong levels of occupancy,” Mr Sales said.
We look forward to building on this with an additional two assets currently under development in Sydney, including our recent acquisition of a site in Macquarie Park which will offer 488 student accommodation beds on completion.”
Nuveen has backed the purpose-built housing sector around the world and “believes it has potential to grow in scale in Australia, driven by favourable demographics and accommodative investment fundamentals”.
The Switch houses both students and young professionals – partly as the tight rental markets make co-living an option for more people in their 20s. Other kinds of housing are targeting people at the latter stage of the age spectrum.
Mason & Main by Nation.
Private land lease business Lincoln Place – which is backed by US investment firm Cerebus – is also building up the scale of its operations. It has just bought Baranduda Lifestyle Estate, a land lease community, in the Albury-Wodonga region on the NSW and Victorian border.
The acquisition took its principal portfolio to 16 assets with more than 2600 home sites across NSW, Victoria, and Queensland.
Alongside its private client assets, Lincoln Place now manages 21 estates with more than 3300 home sites under operation and development.
Lincoln Place joint CEO Ben Hindmarsh said the company was exploring opportunities in the Victoria market as its research indicates demand continues to exceed supply for age-appropriate housing. With housing problems only growing, more capital is on the way.
