Vertical Communities

VERTICAL COMMUNITIES Perspective on Australia’s Build-to-Rent landscape 2025

Novus on Spencer, Melbourne

AUSTRALIAN PROPERTY INSIGHTS

VERTICAL COMMUNITIES

Image: Novus on Sturt

KEY TAKEAWAYS

Demand outpaces supply Record population growth and housing undersupply are driving sustained rental demand, with vacancy near historic lows. This will help underpin rental growth and absorption rates.

BTR is gaining traction Over 20,000 approved units in the national pipeline with another 12,000 under construction, showing growing institutional investment and tenant acceptance. An improving macroeconomic environment and policy backdrop should help projects progress from approval to construction.

Yields are competitive Stabilised BTR assets are pricing in the 4.25–4.75% yield range, on par with PBSA and tightening over time. As more stabilised assets trade, pricing confidence will improve and unlock more activity. Improving cost of debt will help bring capital into the market. Unlevered IRR can provide a more nuanced picture of returns, with BTR looking attractive compared to other sectors.

Policy reform is a turning point

2024 MIT concession and state-based incentives have removed key barriers to capital – improving feasibility and scaling potential. There is scope for further policy support to accelerate delivery.

Platforms are forming at scale Major owner-operators

ESG credentials Supplying an underserved market with professionally managed, high quality rental homes that are operationally efficient and environmentally resilient aligns investor and occupier interests.

Risks centre on delivery Planning bottlenecks, high construction costs, and policy inconsistencies remain the main friction points to watch.

building long-term strategies include Mirvac, GIC, Aware Super, and Oxford. There is plenty of scope for new entrants which we expect to see as global capital increases allocations toward Living sectors.

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AUSTRALIAN PROPERTY INSIGHTS

VERTICAL COMMUNITIES

SECTOR OVERVIEW

Australia’s rental market is evolving from fragmented ownership to an institutional model. This is being driven by housing pressures, investor repositioning, demand for resilient, scalable assets, a strong underlying demand picture and policy reforms.

Build-to-Rent (BTR) has emerged as a compelling model – one that supports the requirements of renters and investors. BTR offers renters a more stable, higher quality living experience, while providing investors with exposure to low-volatility income and a diversified real estate profile. Though still nascent in Australia, the growth of BTR is mirroring the sector in the UK which, along with more mature international examples like the Multifamily sector in the US, demonstrates the significant scope for growth. Superannuation funds, global pension capital, and real estate managers are actively expanding mandates to include BTR as part of their residential and real asset strategies.

CHART 1

AUSTRALIAN REAL ESTATE SECTORS BY INVESTABLE UNIVERSE

350

300

250

200

SECTOR SCALE: SMALL BUT GROWING

150

Despite notable progress, BTR remains an emerging part of Australia’s rental landscape. Just 11,000 units are operational nationwide, with another 32,000 in various stages of planning and construction. This represents less than 1% of Australia’s private rental stock – a stark contrast to the UK (5%) and the US (48%). Yet even moderate scaling could unlock substantial value. A 5% market share would equate to a sector valued at roughly AUD 160 billion – a fifteenfold increase from today.

100

Industrial

Oce

Retail

Built to Rent

Source: Cushman & Wakefield

CHART 2

SECTOR EVOLUTION TIMELINE

First significant wave of purpose-built product begins to complete (Mirvac LIV Munro, Home Southbank, Realm Caulfield)

Australian market surpasses 10,000 operational Multifamily units

Major players Mirvac, Greystar & Home (GIC) establish Australia Multifamily development businesses

First purposefully designed, Multifamily development completes in Perth Australia by major US Multifamily operator Sentinel

Covid-19 disrupts rental market momentum - Australia closes borders to migrants. Vacancy reaches all-time peak in Sydney and Melbourne

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

First-movers (offshore and domestic managers) begin comprehensive market studies on potential for Australia BTR sector

Mirvac becomes first ASX-listed property company to launch BTR fund (ABTRC)

Covid-19 border restrictions re-open - rental market begins to regain momentum Victoria becomes first state to introduce BTR land tax concessions - most states to follow suit

Record-high annual rental growth across Australian market (+20% in major capital cities) More major institutional managers announce BTR strategies: Charter Hall, Scape, Stockland, Cedar Pacific

First stabilised, operational BTR asset trades (Arklife, Robertson Land, QLD) Senate passes major federal MIT tax reform - eligible BTR developments will qualify for the concessional withholding tax rate of 15% (in-line with other key commercial real estate asset classes)

Key foreign buyer tax changes for residential property begin to impact BTS off-the-plan sales rates and project feasibility

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AUSTRALIAN PROPERTY INSIGHTS

VERTICAL COMMUNITIES

CHART 3

GLOBAL POSITIONING

Market

% of Private Rental Market

Sector Stage

United States

12.0%

Mature Scaling

United Kingdom

5.0%

Australia

0.33%

Emerging

GLOBAL POSITIONING While the Australian sector currently accounts for less than 1% of private rental stock, it shares the same underlying drivers that fuelled international expansion: favourable demographics, sustained tenant demand, pro-development planning shifts, and increasing institutional interest. When the UK market was a similar size, it grew by four times in the following three years.

INSTITUTIONALISATION AND POLICY REFORM

The BTR investment landscape has improved considerably with recent policy support and growing investor alignment. Several states now provide land tax concessions, stamp duty waivers, or both – improving development feasibility. At the federal level, the 2024 tax reform introduced a 15% MIT concessional withholding rate for eligible BTR assets, bringing tax treatment into line with other core real estate sectors. Moving forward, the sector’s formal inclusion in PCA/MSCI benchmarks is expected to normalise BTR within institutional portfolios.

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AUSTRALIAN PROPERTY INSIGHTS

VERTICAL COMMUNITIES

DEMAND DRIVERS

A structural shift in Australia’s rental dynamics is fuelling the rise of BTR. Home ownership has become increasingly out of reach in major cities and the average renting period has lengthened. Over the past 15 years, renter growth has significantly outpaced owner-occupier growth across all age brackets.

The income profile of renters is also shifting. High-income households now represent a growing share of the rental base – driven by affordability barriers to ownership and changing lifestyle preferences. These “premium renters” are more likely to seek out buildings with characteristics similar to what BTR assets offer: amenity-rich with professional management and lease flexibility.

CHART 4

RENTING BY AGE GROUP

20 30 40 50 60 70

0 10

Under 35

35-54

55 And Over

1996 2001

2006 2011

2016 2021

*Sydney, Melbourne & Brisbane

Source: ABS

CHART 5

INCOME DISTRIBUTION OF RENTER HOUSEHOLDS

20 25 30 35 40 45

0 5 10 15

$51,550-$77,949

$77,950-$129,949

$129,950-$155,949

>$156,000

1996 2001

2006 2011

2016 2021

*Sydney, Melbourne & Brisbane

Source: ABS

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AUSTRALIAN PROPERTY INSIGHTS

VERTICAL COMMUNITIES

CHANGING HOUSEHOLD STRUCTURES

A growing population also paints a compelling future demand picture. Oxford Economics project Australia’s population to grow more than 12% over the next 10 years, nearly 3.5 million people. This compares very favourably with other developed countries. The population growth comes alongside deeper changes in household composition. Delayed marriage, declining birth rates, and a rise in single-person and couple-without- children households are reshaping what Australians need from their homes. Between 2000 and 2021, the average age of marriage rose by over three years, while divorce rates and the proportion of child-free couples also climbed. This change in household makeup is expected to be a structural rather than cyclical trend: the Australian Bureau of Statistics (ABS) projects that through 2046 the majority of the increase in households will be couples without children, single parent households, and lone person households – all conducive to apartment living.

CHART 6

FUTURE HOUSEHOLD COMPOSITION (MILLIONS)

2021

2046

Growth

Couple family with children Couple family without children One parent families/other families

3.1

4.1

30.9%

2.8

3.8

37.5%

1.3

1.8

38.4% 34.0% 43.8%

Group households

0.4

0.5

Lone person households

2.6

3.8

Total households

10.0

13.7

37.1%

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AUSTRALIAN PROPERTY INSIGHTS

VERTICAL COMMUNITIES

CHART 7

AVERAGE AGE FOR FIRST-TIME HOMEBUYERS IN AUSTRALIA

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Source: Digital Finance Analytics

AFFORDABILITY CONSTRAINTS & OWNERSHIP BARRIERS The demographic and lifestyle shifts are unfolding against the backdrop of intensifying housing affordability pressures. In many metropolitan areas, home ownership has become increasingly out of reach for middle-income earners. Mortgage repayments now consume an outsized portion of household income, with affordability gaps most acute in inner-suburban locations. Over the past twenty years the average age of first-home buyers has increased by a full decade. For many households a delayed or permanently deferred ownership pathway means that long-term renting is no longer a marginal choice but the default tenure.

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AUSTRALIAN PROPERTY INSIGHTS

VERTICAL COMMUNITIES

SUPPLY SNAPSHOT

OPERATIONAL STOCK REMAINS MODEST

As of mid-2025, 11,000 units are operational nationwide, with approximately 20,000 more approved and just short of 12,000 under construction. This represents less than 1% of the national rental market and a marginal share of overall housing completions. Most of the current stock is concentrated in inner Melbourne and selected suburban precincts in Sydney – where feasibility, infrastructure access, and population growth most strongly align. While these early projects have helped prove the model, they remain a drop in the ocean relative to broader rental needs. Importantly, BTR still accounts for only a small fraction of total apartment delivery, and the broader pipeline shows few signs of a near-term uplift. Traditional Built-to-Sell (BTS) activity continues to slow amid high construction costs, weaker presales, and feasibility constraints. While BTS models depend on market timing and pre-sales, BTR’s build-to-hold structure allows capital to stay active and deliver housing through downturns and hedge against broader development volatility. The challenges in the BTS market present an opportunity for BTR investors to forward purchase schemes that were originally for BTS. This can happen either pre or post construction and allows the developer certainty of exit in a challenging environment for off plans sales and quicker deployment of capital for investors. PIPELINE EXPANDING BUT UNEVEN Looking ahead, Australia’s BTR development pipeline is beginning to take shape – but delivery remains weighted toward Melbourne and heavily concentrated in early-stage projects. Overall, the growth of the pipeline reflects growing investor appetite and an improving policy backdrop. But its uneven shape highlights the importance of location selection, planning certainty, and execution capability. With many projects still at DA or feasibility stage, the gap between intention and delivery remains wide.

CURRENT OPERATIONAL UNITS

14,045 20,247 UNITS IN PIPELINES

1,512 5,538

Sydney

Melbourne

STRUCTURAL UNDERSUPPLY AND THE SCALE CHALLENGE Despite growing investor momentum, BTR delivery remains a fraction of what’s needed to address Australia’s chronic housing shortage. Across Sydney and Melbourne – the country’s largest and most supply-constrained rental markets – combined BTS and BTR apartment completions have fallen to seven-year lows. Forward pipelines offer little relief, with delivery volumes still tracking well below long-run averages as planning delays, funding gaps and cost escalations weigh on the broader market. Many BTS projects are now stalled or shelved due to declining presales and uncertain feasibility. This presents an opportunity for BTR as unlike BTS it does not rely on presale funding or retail buyer sentiment. Its build-to-hold structure allows delivery of rental housing at a time when other forms of supply are pulling back, giving it strong counter cyclical credentials. Historically low vacancy means that new product is being absorbed quickly and commanding strong rents. Official forecasts show Sydney will require around 38,000 new dwellings annually, and Melbourne close to 46,000 just to keep pace with population growth and household formation. Current approvals and delivery volumes fall well short of these thresholds, and structural headwinds are unlikely to ease anytime soon. BTR can help to alleviate these shortages. Its delivery model aligns with long-term capital while its operational format supports scale in urban precincts and its fast absorption can drive placemaking in regeneration areas.

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AUSTRALIAN PROPERTY INSIGHTS

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CAPITAL MARKETS

STRONG INSTITUTIONAL APPETITE, LIMITED PRODUCT According to ANREV’s 2025 investment intentions survey, residential real estate is now the most preferred asset class in the Asia Pacific region – cited by 91% of investors, up from 74% in 2023. This rising focus reflects a growing recognition that BTR offers core-like income, downside resilience, and long-term demographic alignment. In Australia, this momentum is supported by tax reform, index inclusion, and early platform performance. Superannuation funds, global pension capital, and real estate managers are actively expanding mandates to include BTR as part of their residential and real asset strategies. It is within this context that Cushman & Wakefield advised on the recent cross-border partnership between Novus and Japan’s Kaden Realty & Development for the delivery of Novus on Spencer in Melbourne, a 190-unit purpose-designed BTR development. This transaction underscores how foreign capital is increasingly backing the Australian BTR sector, providing confidence in the long-term fundamentals of this emerging asset class. BTR also naturally sits with the ESG focus of many institutional investors. It serves an undersupplied key societal requirement – rental housing. It should also align investor and occupier interests as applying higher quality ESG standards to the design, development and operation improves tenant retention and asset resilience.

Yet despite this interest, investable product remains scarce. With relatively few stabilised BTR assets available, most capital is being deployed though development-led mandates, forward-fund structures and recapitalisations. Several offshore groups have also opted to invest in local platforms from the ground up – a strategy that allows greater control but requires longer deployment horizons. This supply-constrained environment is reshaping how capital approaches the asset class. Investors are increasingly willing to assume development risk or enter at earlier project stages, particularly where alignment with operating partners is strong. However, underwriting remains cautious with investors drawing comparisons with other sectors to build comfort. Market participants continue to cite liquidity and scale as headwinds constraining broader institutional adoption.

What Investors Should Watch: • Platform formation driving pipeline depth • Benchmarking via MSCI/PCA to improve pricing visibility • Absorption rates key to income stability • Planning certainty crucial for scale feasibility

CHART 8

ASIA PACIFIC PREFERRED INVESTMENT INTENTIONS

100%

80%

60%

40%

20%

Residential

Logistics & Industrial

Oce

Retail

Student Accommodation

Development

Healthcare

Other

Source: ANREV 2025 Investor Survey

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AUSTRALIAN PROPERTY INSIGHTS

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CHART 9

SECTOR ALLOCATION – GLOBAL OPEN-END CORE FUNDS

2,500

2,000

1,500

1,000

500

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Oce

Retail

Living

Industrial

Hotel

Senior Housing & Care

Source: MSCI

CHART 10

PROPERTY YIELDS BY SECTOR

0% 1.% 2% 3% 4% 5% 6% 7% 8%

BTR

PBSA

O ce

Industrial

Sub-Regional Retail

Source: Cushman & Wakefield Research

PRICING ANCHORED BY COMPARABLES Although transaction history remains limited, pricing

Most BTR valuations are still being underwritten on a build- to-core basis, and few stabilised assets have yet been tested through open-market trades. As more projects reach maturity, secondary market data will be critical in improving price discovery. With the rate cutting cycle underway, the pricing of debt available to investors will continue to improve and both commercial lenders and debt funds are keen to deploy. Competition among lenders should see more leverage offered, tighter margins an additional structures available to borrowers.

benchmarks are beginning to form – with stabilised BTR assets transacting in the 4.25–4.75% yield range. These yields are already converging with other institutional residential formats such as Purpose-Built Student Accommodation (PBSA) and boutique hotels. In some markets, BTR pricing has tightened even further, reflecting growing confidence in income quality and tenant retention. For many investors, this pricing signals that BTR is growing in relevance in diversified portfolios. That said, market transparency remains limited.

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AUSTRALIAN PROPERTY INSIGHTS

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CHART 11

RETURNS ACROSS SECTORS

Office

Industrial

Retail

BTR

Yield

6.25% 2.50%

5.50% 3.50% -95bps

7.00% 2.00%

4.50% 4.50% -40bps

Growth Rate (10-yr)

Leakage

-300 bps

-200bps

Unlevered IRR

5.75%

8.05%

7.00%

8.60%

Source: Cushman & Wakefield

Leakage includes vacancy, incentives, CAPEX, transaction costs.

PLATFORM FORMATION DRIVING DEPLOYMENT To gain exposure at scale, many institutional investors shifted away from asset-by-asset investing toward platform formation. These structures – typically in the form of joint ventures, co-investments, or seeded portfolios – are enabling capital to secure pipeline visibility, reduce deployment risk, and influence operational strategy. However, single asset deals have been more prevalent over the past 24 months, reflecting liquidity challenges but we expect the emphasis to move back to platform. Owner-operator models have been the most prominent structure, allowing stronger alignment between leasing, brand, and income strategy. Platforms such as Mirvac’s ABTRC, Greystar, Home (GIC), and Oxford are vertically integrating to control both development and operations. This alignment enhances efficiency, supports OPEX control, and reinforces brand equity. Platform strategies also support standardisation and scalability, allowing institutional managers to build pipeline across multiple markets with consistent governance, design, and service quality.

LIQUIDITY, INDEX INCLUSION, AND THE ROAD AHEAD

Liquidity remains the most frequently cited risk for BTR investors – especially those constrained by exit requirements or secondary market availability. With few stabilised BTR assets trading to date, underwriting exit assumptions continues to require a degree of conviction. This lack of historical depth is one of the final hurdles to full institutional acceptance. However, the sector’s inclusion in PCA/MSCI benchmarking is expected to materially improve transparency and valuation confidence. As more assets reach stabilisation and begin to trade, investor benchmarking and yield setting will become increasingly robust. Over time, this will drive deeper institutional penetration.

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AUSTRALIAN PROPERTY INSIGHTS

VERTICAL COMMUNITIES

OUTLOOK & RISKS

The long-term outlook for BTR in Australia remains structurally positive. BTR is positioned to emerge as a necessary complement to traditional development models.

Several key trends are reinforcing momentum: • Policy support: Recent tax and planning reforms have created a more level playing field, enabling institutional capital to underwrite BTR with greater confidence. • Capital formation: Investors are forming vertically integrated BTR platforms, with owner-operator models improving alignment between asset performance, leasing strategy, and resident experience. • Rental fundamentals: Persistently low vacancy rates, limited new supply, and strong population growth are expected to underpin rental income growth across key metro markets. Against this backdrop BTR is poised to shift from a niche to established asset class.

Despite strong fundamentals, these risks could slow BTR’s trajectory: • Planning and feasibility: Delays in local approvals, high construction costs, and site acquisition challenges continue to weigh on project feasibility – particularly with projects facing tight margins. • Pipeline execution: Many projects in the national pipeline are early-stage or dependent on third-party capital and permitting. Delivery delays, capacity constraints, and construction bottlenecks could affect project timelines. • Policy inconsistency: State support for BTR remains uneven. Inconsistent application of land tax relief, planning mechanisms, and concessions creates additional headaches for investors with cross-jurisdictional strategies. • Liquidity and exit: With few stabilised BTR assets trading to date, there is limited visibility on secondary market pricing. This presents challenges for underwriting exit assumptions and may inhibit capital scaling until more transaction evidence emerges.

Novus on Sturt, Melbourne

CUSHMAN & WAKEFIELD

Research

Capital Markets

Josh Rose-Nokes Director, Living Research, APAC josh.rosenokes@cushwake.com

Conal Newland International Director, Head of Living, APAC conal.newland@cushwake.com

Dr Dominic Brown Head of International Research, APAC & EMEA Dominic.Brown@cushwake.com

Louise Burke Director, Living Capital Markets, ANZ louise.burke@cushwake.com

Lin Lee Senior Strategic Research Analyst, Australia lin.lee@cushwake.com

Paul Savitz Director, Living Capital Markets, ANZ Paul.Savitz@cushwake.com

Image: Novus on Spencer Build to Rent development in Melbourne

About Cushman & Wakefield Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2024, the firm reported revenue of $9.4 billion across its core service lines of Services, Leasing Capital Markets, Valuation and other. Built around the belief that Better Never Settles, the firm receives numerous industry and business accolades for its award-winning culture. For additional information, visit www.cushmanwakefield.com.

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