Vertical Communities

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

CUSHMAN & WAKEFIELD