Growing demand for build-to-rent (BTR) projects in Australia

John Mowat, UBS regional head of real estate, emphasises the pressing need for more build-to-rent (BTR) developments in Australia. In an interview with Financial Standard, Mowat highlights the growing demand for BTR projects and the significant interest from global institutions and government incentives in this sector.

Mowat notes that UBS currently manages over US$30 billion in BTR assets worldwide, with substantial growth observed in the US and Europe. The BTR strategy in Japan and Australia aligns with this global approach.

He mentions that in Japan, UBS has been involved in approximately 20 developments, and in Australia, they've been active since 2014 when they initiated their first project. This long-standing presence demonstrates their commitment to the Australian BTR market.

Mowat emphasises that while there is a place for luxury BTR offerings, the majority of the Australian market leans towards middle-market products. UBS believes that this middle market is the sweet spot for the future of BTR in Australia.

UBS achieved a significant milestone by fully letting the Gold Coast 2018 Commonwealth Games Athletes Village (above), becoming the first manager to operate a BTR asset in Australia. Mowat sees this project as proof that BTR can work successfully in the Australian market.

He acknowledges that being pioneers in the Australian BTR market presented operational challenges, such as educating teams on rental income underwriting, finding service providers familiar with the market, and adapting to different data collection methods compared to the US.

Furthermore, Mowat highlights the importance of conveying to potential residents that BTR is different from renting from an individual landlord. UBS aims to create a sense of community and provide long-term security for tenants.

Looking ahead, Mowat anticipates increased interest in early-stage involvement in developing middle-market BTR assets. While luxury amenities have been a trend in the BTR sector, he believes the market is shifting towards greater diversity in offerings.

Mowat points out that although only around a dozen BTR projects are currently operational in Australia, approximately two dozen more are in various stages of development. This suggests a substantial growth trajectory for the Australian BTR market, with an estimated 25,000 units in development.