Macquarie-backed business to develop towers for suburban renters with $360m deal

The investment bank is supporting a shift in style of towers from trendy inner city areas to the suburbs.

Build-to-rent company Local is undertaking a project in the Melbourne suburb of Box Hill

As millions of Australians wrestle with rent rises, a new wave of big institutions are pouring into the market to build towers to accommodate them that they say will help solve the housing crisis.

The new kinds of towers are directed towards housing the younger generation, which is ­effectively locked out of buying homes, and for longer-term renters seeking an upgrade from small landlords.

In one of the latest moves, the business Local – backed by investment bank Macquarie’s investments arm – will build a major tower in Box Hill in suburban Melbourne, which has emerged as the epicentre of the new industry.

The towers are also springing up in the Docklands and Southbank and trendy inner-city suburbs in Sydney and Brisbane. Developers are moving into the area partly as the momentum for traditional apartment projects slows, due to rising interest rates and construction costs.

Build-to-rent developers face the same pressures but have been able to get projects off the ground, partly as big institutions have been willing to back them.

Overall, the build-to-rent industry is heading towards a massive 55,000 apartments across major capitals, and it is showing signs of maturing as large players take the lead and some smaller groups look to sell sites.

Local has just picked up the 425-apartment project in Box Hill from developer Jeff Xu’s Golden Age Group.

The deal, worth about $360m, is the latest acquisition for the operation and will take its portfolio to more than $1.1bn and more than 1300 apartments over three projects.

The Box Hill project will sit in a fund alongside its project in South Melbourne.

The site is the former Whitehorse City Council car park and will be developed into a dual- tower project. In keeping with the luxurious bent of the project architecture and interiors firm Fender Katsalidis will design the 425 units.