Build-to-rent may be next big thing in property

ABOUT $300 billion worth of Australian residential assets could be owned by institutional investors within the next couple of decades, according to industry forecasts.

Commercial real estate agency CBRE says the value of residential assets owned here by institutions could hit that threshold if the build-to-rent sector evolves in Australia in the same vein as it has in the US.

The sector, also known as multi-family, covers multi-unit residential buildings owned by a single entity. It has been embraced by players ranging from Lendlease and Mirvac to shopping centre titan Westfield.

The asset class is emerging in Britain and Australia and has the potential to drive a fundamental shift in the funding mix for residential projects.

Lendlease has the edge on local players trying to enter the build-to-rent sector and is close to striking a deal to secure £1 billion ($1.64 billion) worth of finance from the Canada Pension Plan Investment Board for its schemes in Britain.

Mirvac has proposed a $750 million local fund while Westfield last week said it was teaming up with specialist apartment operator Greystar to launch a residential tower in San Diego. CBRE head of research for Australia Stephen McNabb said the multi-family sector represented about 15 per cent of properties with five or more units in the US – a position obtained after 25 years of growth.

The sector accounts for 20 per cent to 25 per cent of the $US2 trillion ($2.49 trillion) in institutional property investment in the US – ranking it as the second biggest investor allocation after office property.