Pro-invest, Kajima plan $1.5b build-to-rent portfolio
Pro-invest Group has partnered with Japan’s Kajima Corporation to develop a portfolio of build-to-rent housing across Australian cities that could be worth as much as $1.5 billion in five years’ time, in a sign investors have become more confident about the outlook for construction costs.
The partnership between Pro-invest, a fund manager, developer and operator, and Tokyo-listed Kajima, one of Japan’s largest builders, is already working on its first development, a 300-unit project in Sydney, Pro-invest chairman Ronald Barrott said.
The initial deployment of $500 million could triple in the next five years, Barrott told The Australian Financial Review.
“The interest is there and we believe we can secure the necessary commitments for the initial part, but that’s only scratching the surface of the requirements of demand in the market,” he said. “When you look at the demand for housing, it’s phenomenal.”
The tie-up shows a widening of investment into Australia’s emerging build-to-rent sector, in which Japanese institutional investors have long been interested. But to date, development has been dominated by a focus on the premium rental market through tie-ups such as Mitsubishi Estate with Mirvac and Daiwa House with Lendlease.
The new partnership is aiming to develop mid-market rental properties, Barrott said.
“We would tailor the product to match demand and the location, but we’re trying to develop a product that will speak not just to the top end,” he said.
“It’s the average person out there that needs housing. And in the right locations, we will look at key worker housing. [Key workers] need to be close to cities. They are working in cities in key roles.”
BTR sector picking up
The market opportunity for a diverse range of housing is large, Kajima Australia managing director Tatsuru Isano said.
“These developments will prioritise sustainability, community, and affordability and will help address the shortfall in supply of quality rentals in the market,” Isano said.
Australia’s build-to-rent sector – like other forms of housing development, slowed as surging building and borrowing costs dampened activity – is now picking up as project feasibilities improve and building costs become more predictable.
Pro-invest, founded in 2010 and which has since developed 6000 hotel rooms across 32 hotels in Australia and New Zealand, set out two years ago to expand into the build-to-rent sector. Its hospitality experience gave it the skills to manage build-to-rent assets, Barrott said.
After four years of build-to-rent unit completions at or below the 2000-mark, the total jumped above 4000 last year and is predicted to rise to just under 6000 this year, figures from commercial real estate agency Colliers show.
Colliers’ residential head of living, Robert Papaleo, said foreign investors were becoming more comfortable with the sector.
“So far in 2025, we have observed a positive shift in sentiment towards Australia’s BTR market from global investors with first preference remaining for entry via the Sydney market,” Papaleo said.
“Japanese capital is particularly attracted given their appetite for defensive, income-producing investments with long-term growth potential”.
The established presence of a similar product in their home market also gave Japanese investors a level of comfort with the sector, he said.
“Success in Japan’s multifamily housing market over the longer term has further underpinned confidence for several Japanese players to enter the Australian market alongside experienced local developers at earlier stages of project delivery to share elevated returns.”
Individual projects would be “modest” in size, ranging from 200 up to 350 units, Barrott said.
“We would like to keep projects to a sensible size,” he said. While medium-rise would be the most common scale, they “wouldn’t turn away from high-rise in the right location,” he said.
Well-connected sites
In addition to Sydney, Melbourne, Newcastle and Adelaide were cities under consideration and the partnership aimed to secure well-connected sites that were a mix of inner-city and city-fringe locations, Barrott said.
Kajima became a player in Australian construction a decade ago when it acquired a majority stake in mid-tier builder Icon. Two years later, it took over contractor Cockram.
Icon was likely to build the partnership’s new housing projects, Barrott said.
“It’s in the best interest of the joint venture if Icon does,” he said. “They’ve done three successful jobs for us, with no problem at all. They’ve delivered on time to very, very good quality. Competition-wise, we’ve been in the market long enough. We know how to keep our contractors honest.”
He also said Kajima’s decision showed offshore investors had become comfortable with the environment in Australia after the disruptions of high borrowing costs and supply chain shortages that drove costs up.
“Investors have been concerned about the issues around ground-up developments with increasing construction costs,” Barrott said.
“It left some early build-to-rent projects struggling when it came to their financial parameters being breached because of a substantial increase in construction costs over a very short period.”
The partnership’s initial capital was likely to come from a couple of sources, but the pool of funders would grow, Barrott said.
“It could be a club initially, one or two larger investors,” he said. “For pension funds and the like it’s ideal. They’re not looking to shoot the lights out with too high a return in the first instance. They are in it for the long term.”
