Build-to-Sell Conversions on Rise as Pathway to Mid-Market BtR

The rental market in Australia has been crying out for more affordable supply and it seems the solution may already be sitting in some developers’ pipelines. Australia’s build-to-rent sector has been heavily pitched at the premium end. First-generation assets competed on amenity, targeted high-income renters and clustered in inner-city locations where pricing power could carry the cost. Infolio partner and head of growth and operations Nicole Hiddlestone said “there is a huge demographic crying out for that [middle-market] build-to-rent asset and it’s not there”. Panelists at The Urban Developer Build-to-Rent Summit in Melbourne agreed but said feasibility constraints were the main barrier to a mid-market product emerging. Construction costs and planning timelines make ground-up development outside premium locations and products difficult to justify. Enter UKO co-founder Rhys Williams, who said private developers sitting on stalled build-to-sell stock may find a conversion feasibility worth running. Williams said once selling costs, commissions and sell-down timelines were stripped out, build-to-rent was a credible alternative exit. In some cases, the net return beats that the strata would have produced. “Based on the returns, it’s not a get-out-of-jail strategy,” Williams said. “The returns in some of these projects are superior to what would otherwise be garnered in the sell.” ▲ UKO co-founder Rhys Williams said conversion feasibilities were delivering returns that beat a standard strata sell-down. Cushman &amp; Wakefield head of living for APAC Conal Newland said rents across almost every Australian capital currently fall short of what is needed to make a new build-to-rent development feasible. For a conversion, the build cost is already locked in. The developer prices against a strata sell-down comparison, not a ground-up feasibility, Williams said. Get the operator in early Williams said there were four main considerations for developers working through a conversion . The first was early engagement with an operator. “We get involved in the design process, the underwriting process, and bring in procurement concepts around FF&amp;E and amenity areas,” Williams said. Early operator involvement shapes the conversion brief from the outset, not after the building is complete. This avoids costly changes later and ensure the asset is underwritten to realistic operational assumptions. ▲ A gym is one of several amenity spaces that could be retrofitted from a building’s original build-to-sell configuration. Keep amenity lean and purposeful “We’ve taken projects and we might have removed a couple of studios that are redundant, turned them into wellness areas,” Williams said. “We might have integrated a cinema room in unused storage space. We might have integrated some co-working in there as well. “These are still relatively light touches, but it differentiates the product that will ultimately attract a mid-market consumer, and the rents will sit somewhere between what a build-to-sell rent would be and what a very premium build-to-rent product would be.” Align developer, operator, capital from start “What it’s about is having conversations with developers and establishing what stage they’re at,” Williams said. “Sitting down with them, potentially someone in capital markets, and turning it into an investable product where you’ve got the alignment between the development, the operator that tries to energise the product, and then picking the time for a developer to be able to exit. “[As an operator] our job is not to inhibit someone’s liquidity. Our job is to provide the operational smarts, energise [the asset], maybe get them out of jail or get them to do a bit better.” Keep the exit flexible “The developer could say, I want to get a bit more margin out of this, therefore I’m going to stabilise the asset ... and then line up a competitive process,” Williams said. “The institutional investor that then takes this out, because it’s strata subdivided, has the ability to build into their model and exit down the track as a strata subdivision to sell product. “They’re not just buying a purely passive income stream waiting for rental growth.” Delete Williams said UKO’s Parramatta Central project ( pictured ) is where this all played out in practice. The 179-apartment development was originally conceived as a build-to-sell strata tower but was repositioned before completion and opened in July 2025. Well connected to public transport, a shopping centre and Western Sydney University, the building pulls a broad rental cohort, including students, young professionals and downsizers. It was fully leased within 12 months. “This positioning allows for a more defensible customer base that appeals to a wide demographic and ensures a high renewal rate,” Williams said. The summit marked the public launch of the MSCI Build-to-Rent Performance Index. It’s the sector’s first dedicated performance benchmark. Early results show build-to-rent returning 7.9 per cent annually, with operating costs running at 32 per cent of gross income, well above what early feasibilities assumed. Purpose-built platforms are cutting amenity in response. Converting build-to-sell stock, which may never have had a full amenity suite from the start, into build-to-rent stock may be a smarter response. Parramatta Central is the proof-of-concept.

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Leon Della Bosca
Wed 24 Jun 26

Build-to-Sell Conversions on Rise as Pathway to Mid-Market BtR

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