This article is from the Australian Property Journal archive
AUSTRALIA’S build-to-rent sector has received another shot in the arm, with US real estate investment and development firm Sentinel and Dutch pension fund manager PGGM announcing a $1.5 billion partnership to develop and manage communities across Australia.
Sentinel already has more than 1,300 build-to-rent units under various stages of development, including an under-construction $150 million project in West Melbourne, and its Element 27 project in Perth’s Subiaco.
PGGM’s first investment tranche opens up a pipeline of over $700 million in initial development potential for the venture, which is aiming to develop a national portfolio of approximately 2,500 build-to-rent units, with the first two sites for development already confirmed.
Sentinel will provide investment management, development management and property management services to the partnership.
“Sentinel is proud to expand our partnership with PGGM into the Australian market. Their commitment to this venture is a clear vote of confidence in our Build to Rent platform and the future of the sector in Australia,” said Michael Streicker, president of Sentinel Real Estate Corporation said.
“We’re committed to continuing to deliver high quality, sustainable and community-focused living that enhances the housing choices available to Australians. This is particularly important at a time where changes in the housing market and supply levels are front of mind for so many.”
Jikke de Wit, senior director private real estate of PGGM said that although the Australian build-to-rent sector is still relatively small, “we believe that it will grow over time and become an important part of the Australian housing market”.
Australia’s build-to-rent sector is set to mature into a $9.6 billion market by 2027. Construction of projects already underway is expected to peak in 2022, with 14 major institutional investors currently developing 40 build-to-rent projects. Federal government tax arrangements still present challenges to the nascent sector, while the Victoria and NSW government have introduced concessions.
Most existing developments either under construction or in planning are in Victoria. Major institutional players and developers active in the market include Greystar, Mirvac, Investa and Oxford’s Indi, as well as Gurner, Altis and Hines.
With rental vacancies tightening and the National Housing Finance Investment Corporation forecasting a shortfall of 163,400 homes by 2032, property players say build-to-rent can fill the void left by build-to-sell.
Sentinel and PGGM have partnered previously in the US. Sentinel has over 50 years’ experience in the build-to-rent, or multifamily sector.
