Ontario Teachers' increases bets in Australia’s booming living sector
Australia's multi-family living sector is attracting strong interest from institutional investors, who are attracted to the nation's growing population and an increasing trend among consumers to choose rental housing options.
Ontario Teachers'
The most recent deal comes from Ontario Teachers' Pension Plan and Hines, a real estate investment firm, both of which plan to jointly acquire two build-to-rent (BTR) assets in Brisbane, comprising 354 units.
Both parties declined to confirm any financial terms of the deal, which was announced on October 1. However, the Australian Financial Review reported the deal value at A$350 million ($241.8 million).
The assets were sold by Sydney-based, family-owned construction and property group ADCO, whose Arklife brand manages the projects.
“These assets offer us a strategic entry into Brisbane, allowing us to create value through active asset management while providing tenants with a compelling living experience," said Jun Ando, head of Asia-Pacific real estate at Ontario Teachers' Pension Plan.
EMERGING OPPORTUNITY
Australia's BTR sector is in its early stages, with demand significantly outpacing supply, according to Michael Dziegielewski, development principal, living, Australia at Hines.
"Major cities like Sydney, Melbourne, and Brisbane are experiencing tight rental markets, driven by overseas migration and a trend towards renting among young professionals," Dziegielewski told AsianInvestor.
Hines
This imbalance creates an attractive investment proposition, offering potential for stable cash flows and income growth while addressing Australia's pressing need for quality rental housing.
"In the US and Europe, where BTR is well-established, the focus is on differentiating through tenant experience, amenities, and operational efficiency. Australia's market is following a similar trajectory, mirroring the early growth stages we've seen elsewhere," he said.
Both private and public stakeholders are becoming more familiar with the BTR model, he added.
“The current market fundamentals, including strong rental growth and high occupancy rates, are attracting significant investment interest," said Dziegielewski.
BROADER IMPACT
The country’s BTR sector emerged in the early 2010s and has since seen surging interest from institutions such as Ivanhoé Cambridge, Aware Super, APG Asset Management, JLL, Scape, PGGM and Bouwinvest.
Ivanhoé Cambridge
As Australia grapples with a severe housing crisis, marked by low vacancies and rapidly rising rents in major cities — increased institutional investment in BTR can play a crucial role in alleviating this crisis, according to Laurent Fischler, head of investments, Asia-Pacific, at Ivanhoé Cambridge, the real estate arm of Canadian pension giant CDPQ.
"It brings the necessary capital to get projects off the ground and ensures high standards in construction and operation, ultimately providing better housing options for tenants," Fischler told AsianInvestor recently.
“The government has vowed to help alleviate the crisis by fast-tracking planning applications for new residential projects,” he added.
Fischler expects rapid growth in both supply and quality of new BTR 'stock' in the coming years.
As the sector matures, he also anticipates consolidation within the sector, with smaller players being acquired by more dominant operators that achieve economies of scale.