PBEC Roundtable Dialogue Webinar Series 2020 - Topic: Investing in Real Estate - Demand for Commercial subsectors like Co-Living in Asia
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PBEC Roundtable Dialogue Webinar Series 2020
Topic: Investing in Real Estate - Demand for Commercial subsectors
like Co-Living in Asia
“Co-Living: Branded Dormitories or a Viable Asset Class?”
Clinton Ostwald Mark Power
Eli Konvitz Regina Lim Jason Eggleton
Group Director Senior Director & Head
Director Urban Head of Asia Pacific Acquisition and
Property Economics & of Build to Rent Fund at
Development & Design SE Capital Markets Development Manager
Research at Urbis - Qualitas Australia
Asia at Atkins Global Research Senior Consultant
Shaping Cities & (Australia) Former
(Hong Kong SAR & SE Asia) Asia Pacific at JLL – Highgate Management
Communities Director of National
Jones Lang LaSalle Pty Ltd & Australia
(Australia) Australia Bank
(Singapore) Representative Fortis
Bridge (Australia &
Vietnam)
Co-living in a new age Eli Konvitz September 2020
City paradigm
Home
Cultural attraction
Restaurant
Event space
Coffee shop
School
Bar / nightclub
Shopping
Workplace / office
Street life
Gym
Serendipity
Open space
City paradigm
Urban form – how will cities change? Home
Cultural attraction
Density vs over-crowding
Restaurant
Global CRE Event space
Sub-centres Coffee shop
School
Effects on transport infra and TOD
Bar / nightclub
Where will investors go? Shopping
Workplace / office
Where will the change be?
Street life
Gym
Serendipity
Open space
Co-living
…do we need Covid-safe spaces for Home
working, collaborating, socializing, Cultural attraction
learning…? Restaurant
Captive market for city-centre mixed- Event space
use offer (which may struggle otherwise) Coffee shop
School
Design to combine co-living with
Bar / nightclub
production space (workshops?)
Shopping
Workplace / office
Street life
Gym
Serendipity
Open space
Co-living
…do we need Covid-safe spaces for Home School
working, collaborating, socializing, Restaurant
learning…? Coffee shop Shopping
Captive market for city-centre mixed- Bar / nightclub
use offer (which may struggle otherwise) Workplace / office Open space
Gym
Design to combine co-living with
Cultural attraction Street life?
production space (workshops?)
Event space
Serendipity vs safety?
Our values are the essence of our company’s identity.
They represent how we act, speak and behave together,
and how we engage with our clients and stakeholders.
We put safety at the heart of
everything we do, to safeguard
people, assets and the environment.
We do the right thing,
no matter what, and are
accountable for our actions.
We work together and embrace
each other’s unique contribution
to deliver amazing results for all.
We redefine engineering
by thinking boldly, proudly
and differently.
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APAC Real Estate Investment Transaction Volumes
100
Real estate 90
transactions 80
70
down 32% in 60
USD Billions
the first half 50
40
2020 30
20
10
0
1H15 1H16 1H17 1H18 1H19 1H20
Japan China Australia South Korea Hong Kong Singapore AsiaPac All Others
© 2020 Jones Lang LaSalle IP, Inc. All rights reserved. 9
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Underwriting assumptions uncertainty 43%
Lack of investment product 18%
60% of investors see
uncertainty as the
biggest challenge
Pricing uncertainty 17%
Travel restrictions 14%
Competition 8%
© 2020 Jones Lang LaSalle IP, Inc. All rights reserved. 10 10Multi-family sales in Structural, not cyclical:
1H20 close to FY19 allocation, diversification, rates
Multi-family sales Global Investment Volumes by Sectors Q2, 2020
are second only to
offices globally. Retail
Alternatives
5% Healthcare
11% 4%
Hotel
Globally, multi-family transactions 4%
made up 25% of volumes, doubling
from a decade ago. From 13% Residential Industrial From 10%
in 2010 25% 18% in 2010
Japan assets dominate, but
Mixed Use
growing interest in Australia, South 3%
Korea, China Office
30%
© 2020 Jones Lang LaSalle IP, Inc. All rights reserved. Source: JLL estimates, 2019 11Lower interest rates
create wider yield Global multi-family yield spread over office yields
for real estate
Direct real
estate has
been shown
to be less
volatile than
equities
or bonds
As more
rates become
negative, real
estate’s
income yields
seem even
more attractive
Source: JLL and Reuters
Source: DBS, 1 Sep 2020
© 2020 Jones Lang LaSalle IP, Inc. All rights reserved. 12Presented by Jason Eggleton Co-Living Branded Dormitories or a Viable Asset Class Micro Apartments Co-Living Phenomenon Australia
Micro Apartments
HR BN C N
16 0
BTH
B NDO
D BED
Prop-tech
F
H
DR
DK
T T Movable space
Ability to personalize
BED (ON)
CONTRO
K TCHEN
Long term tenure
Residency security
NK CTP ROBE N CHE N CHE
DRE ER
BO RD N T PE 01Generation Z 500,000 more 25-34 year olds in Australia by 2030
We build vertical villages that manifests empowerment, creates collaboration and sparks lifelong friendships.
Co-Living Impact Investing in the Real Estate Sector.
The New Housing
Spectrum
Co-Living and Build to Rent
Clinton
OstwaldSEEING SHIFTS – PRE & POST COVID-19
AFFORDABILITY ALREADY DRIVING
CHANGE
Age Brackets
20-34 35-49 50-64 65-79 80+ Total
2006
Renting 1,532,300 993,500 519,300 232,800 66,600 3,344,500
Owner Occupier 2,053,400 2,991,300 2,677,600 1,436,800 422,800 9,581,900
Population
3,585,700 3,984,800 3,196,900 1,669,600 489,400 12,926,400
(Private Dwelling)
Renter % 43% 25% 16% 14% 14% 26%
Owner Occupier % 57% 75% 84% 86% 86% 74%
2016
Renting 2,115,600 1,312,800 769,100 335,100 82,200 4,614,800
Owner Occupier 2,260,000 2,942,400 3,097,300 2,053,400 575,000 10,928,100
Population
4,375,600 4,255,200 3,866,400 2,388,500 657,200 15,542,900
(Private Dwelling)
Renter % 48% 31% 20% 14% 13% 30%
Owner Occupier % 52% 69% 80% 86% 87% 70%
2026
Renting 2,763,540 1,690,288 910,758 488,869 160,398 6,146,836
Owner Occupier 2,993,835 3,762,253 3,643,031 3,003,051 1,073,431 14,342,617
Population
5,757,375 5,452,541 4,553,788 3,491,920 1,233,829 20,489,453
(Private Dwelling)
Renter % 48% 31% 20% 14% 13% 30%
Owner Occupier % 52% 69% 80% 86% 87% 70%
Source: ABS; UrbisSHAKE-UP ON ASSUMPTIONS
AUSTRALIA’S OVERSEAS
MIGRATION STORY IS BEING
RECAST
Net overseas migration contributes 60% of total population growth and is
projected to fall well below the decade average of 215,000 p.a.
Total NOM
232,000
6,600 TAS,NT,ACT
13,600 SA
15,200 WA
31,300 QLD Total NOM
154,000 (-34%) 900 TAS,NT,ACT
1,600 SA
1,700 WA
81,800 VIC 3,900 QLD
11,000 VIC
11,800 NSW
Total NOM
83,400 NSW 31,000 (-87%)
FY19 FY20 FY21
Source: ABS, TSY, Urbis
Note: State-based NOM distribution references ABS FY19 shares and 3-yr average; number rounding may affect summed totals.TURNING OFF THE MIGRATION TAP WILL HIT CENTRES HARD IN THE SHORT TERM
TURNING OFF THE MIGRATION TAP REQUIRES
A RETHINK AND RESHAPE READY FOR
RECOVERY
OVERSEAS MIGRATION
is accounting for In total these areas have
MORE THAN 50% SYDNEY AND APARTMENT MARKET averaged
WILL BE THE 39,161 DWELLING
OF POPULATION GROWTH MELBOURNE WILL BE
in 277 SA2 areas nationally HARDEST HIT APPROVALS PER
(21% of areas in capital cities) THE HARDEST HIT with 80% of supply in these ANNUM
in FY 2019). 78% of SA2 areas
areas has been units (97% over the last three years. A
in these cities.
In total in these areas, migration average in the top 10 areas). quarter of the major capital
accounted for 109% of population city total.
growth.SUSTAINING DELIVERY
HOW TO ABSORB RESIDUAL STOCK + PLUG FUTURE
GAPS?
Volume in Sales by Status New Apartment Project Launches
80,000 450
70,000 400
350
60,000
300
50,000
250
40,000
200
30,000
150
20,000
100
10,000 50
0 0
Presales Construction Built Total Sydney Melbourne Inner Brisbane Gold Coast Perth
2018 Q2 2019 Q2 2020 Q2 Annual Average 2015-2018 2019 2020 H1Rolling Quarterly Supply of New Apartments - Australia
INVERSE 16,000
14,000
Built Units
30%
RELATIONSHIP
Forecast Built Units 25%
12,000
% of Available Stock Sold
20%
10,000
% Avail.(%Stock
Linear Sold
of Available
8,000 Trendline
Stock Sold) 15%
MORE NEEDED TO
6,000
10%
4,000
5%
PLUG THE BTS & CO-
2,000
0 0%
LIVING GAP Source: Urbis Apartment Essentials
URBIS.COM.AULAYERED MARKET DIVERSE Urbis Rental Demand Diamond OPPORTUNITY Innovation & Diversity: Rent to Own Shared Equity Co-living BTR Affordable BTR Mixed Tenure: Integrating Affordable & Social
PBEC Roundtable
Co-Living – A Viable Asset Class
Sept 2020
PRIVATE and CONFIDENTIAL
This document is for the sole purpose of the recipient. No part of it may be
circulated, quoted, or reproduced for distribution outside the recipient
organisation without prior written approval from Qualitas. This document does not
Commercial-in-Confidence 28
constitute an offer.Build to Rent / Co Living State of Play
Qualitas are strong advocates of both Build to Rent and Co-Living in the Australian market, and are actively
obtaining and deploying capital in this emerging space.
We see Co-Living as providing affordable, high quality rental accommodation, in desirable locations, to
Generation Z.
Whilst Build to Rent has gathered significant momentum in Australia over the past 2 years, with a delivery
pipeline of circa 10,500 apartments over 33 projects across the eastern seaboard. Co-Living on an institutional
scale is only now starting to gain momentum, with a pipeline of circa 1,200 apartments.
Co-living is very well suited to unlocking sites in inner Sydney and to a lesser extent Melbourne where land
prices are high, which make traditional Build to Rent difficult.
A recent study conducted by Savills found that 88 of the top 100 ranked regions for Co-Living in Australia are
located across our two global gateway cities of Sydney and Melbourne.
Commercial-in-Confidence 29Recognition of the Sector by Government
The NSW State Government has recognised the importance of this sector by recently providing a 50% land tax
concession.
It has also recently released a draft new Housing Diversity Planning Policy which looks to include Co-Living as
an emerging typology within the State Planning System. This draft policy aims to provide a greater level of
planning certainty, by way of detailing certain zones where Co-Living is a permitted use.
The draft policy also seeks to provide guidance around the nature of the developments specifying amongst
other things minimum apartment sizes (30-35 sqm), car space ratios (0.5), communal (2sqm) and private open
space requirements (4sqm).
The Victorian State Government is expected to follow the lead of NSW in promoting both Build to Rent and Co-
Living developments.
Commercial-in-Confidence 30Capital
Returns
The returns work!
For Build to Rent Developments we are seeing unlevered equity IRR’s reasonably forecast in a range of 7-9%
p.a, with levered equity IRR’s in the range of 10-14% p.a.
Co-Living returns are higher again given the greater density incorporated within the development, with
unlevered IRR’s reasonably forecast at 8-11% p.a. and levered equity IRR’s into the mid teens.
Equity Capital
We are seeing emerging institutional equity capital entering the BTR sector in Australia from the likes of Mirvac,
GIC, Blackstone, Greystar, Sentinel and more recently the first material play by an Australian Superannuation
Fund with a significant investment made by Australian Super into Assemble.
We anticipate the same suite of investors will also enter the Co-Living space.
Further need exists for equity capital to enter the sector. Qualitas will be launching a bespoke BTR equity
opportunity over the course of the next 60 days, and intends to do more in this space in the future.
Commercial-in-Confidence 31Capital / Summary
Debt Capital
Available from traditional Banks at moderate levels of gearing.
Qualitas launched an alternate debt capital solution earlier this year being the Qualitas Build to Rent Impact
Debt Fund, with the cornerstone investor being the Federal Government’s Clean Energy Finance Corporation.
This Fund is designed to provide both leverage and tenor to developers in the BTR and Co-Living space.
Importantly this Fund is -
Summary
Latent demand exists for Co-Living product in Australia.
Capital is entering the sector and will continue to do so as the risk adjusted returns are compelling.
Commercial-in-Confidence 32You can also read
