Land Lease Braces as Heavy-Hitter Investors Circle $12tn Living Sector

Australia’s property sector is sitting on a $12 trillion sleeping giant and global institutional investors are fast waking up to it. As part of a structural capital rotation, the big money is now circling underpenetrated territory—the nation’s living sector. And that has put what has emerged as one of the sector’s most compelling asset classes—land lease communities—squarely in its sights, with the lure of frictionless cash flows and high margins. “Despite all the news and noise, international capital is very interested in Australia,” CBRE head of Pacific research Sameer Chopra told The Urban Developer Land Lease Summit in Brisbane on June 25. “Their favourite market, favourite place to invest is the US, and Australia ranks second, third after that. “And retirement living, including land lease, is increasingly popular. “I think what’s been really interesting is that private equity, domestic private equity, has started to take quite a big interest in the sector… and that’s always a good sense, because they follow the cash flows, they do a lot of detailed modelling, and they’re now very active in this market.” ▲ CBRE head of Pacific research Sameer Chopra: Private equity has started to take quite a big interest in the sector… and that’s always a good sign. The living sector—encompassing land lease communities, student accommodation, build-to-rent and seniors living—accounts for a staggering 85 per cent of Australia’s $14 trillion total real estate value, he said. “Just to kind of put it in perspective… that is about five, six times bigger than the entire stock market in Australia. “So, living is it,” Chopra said. “It’s the dominant component of real estate in Australia.” Yet, the sector has remained relatively untapped by major corporate players—with its under-institutionalisation now being seen as an irrestibly long and lucrative commercial runway. “Only about 2 per cent of the living sector in Australia is currently commercially, institutionally owned and that’s where the upside is,” Chopra said. “That 2 per cent is going to get much bigger. It’ll get to 5, 10, 15, 25, 35, 50 per cent.” Contrasted against global markets—where his research indicated the living sector commanded almost half of all real estate investment in the US and about a third in Europe—the Asia-Pacific region languishes at under 10 per cent. ▲ A rendering of the Panorama community at Wilton, NSW: The living sector accounts for 85 per cent of Australia’s $14 trillion total real estate value. “We’ve got a long, long, long way to go,” Chopra said. “To go from that sort of 8 per cent up towards 50 per cent means a lot of institutional capital is going to come into the living sector.” And with it, that glaring gap will inevitably close. Land lease operators and investors in Australia were comfortably targeting “mid-teens” internal rates of return (IRR) with the addition of moderate leverage, Chopra said. “There’s only two sectors that do this… where revenue becomes profit very easily: land lease and self storage,” he said. “In most other sectors you have a massive amount of leakage.” He cited high property management fees in shopping centres, costly tenant incentives in office buildings, and the ongoing operational costs of tenant turnover in residential apartments. As well as inherently avoiding such cash flow killers, the core commercial drivers making the land lease asset class so attractive are deeply rooted in Australia's “massive supply-and-demand mismatch”. “We don’t do vacancy in Australia, mainly because we have very good population growth and very little supply,” Chopra said. “Tight vacancy equals strength of cash flow and that’s why pricing in the living sector tends to be so good. You can underwrite growth in those cash flows because the vacancy is super, super tight. “Our rough estimate of incremental demand is that there’s about 10,000 people per annum looking at land lease communities… [but] the supply typically runs at between 1500 to 2000 new dwelling a year,” Chopra said. Nationally, there are currently just over 40,000 land lease homes operating. However, the pipeline is rapidly accelerating, with 17,000 homes actively under construction and another 12,000 in the planning pipeline—indicating the asset class could scale to 55,000 to 60,000 homes over the next couple of years. The epicentre of this growth is coastal Queensland, which accounts for nearly half of the industry’s active stock and future pipeline. Such is the demand, Chopra said, that when new, high quality land lease communities are delivered the homes “can sell at anything up to 20 per cent premium to the prices of other homes in the same area”. ▲ Urbis associate director Kylie Newcombe: the “silver renter” is rising as a major force within the broader living sector. The demographic wave driving the land lease demand was evolving rapidly, Urbis associate director Kylie Newcombe told the summit attendees, highlighting the emergence of the “silver renter” as a major force within the broader living sector. The proportion of renters aged over 55 had seen steady growth over the past decade, the Urbis data showed. From 2016 to 2026, it estimates the cohort of silver renters has increased by 350,000—pushing it to more than 1.2 million. “We often hear this common narrative around the cashed up baby boomers or, at the other extreme, the older poorer Australian renter,” she said. “But we never really talk about what’s actually in between,” Newcombe said. “One-third [of over-55 renters] are still working in some capacity and 10.6 per cent of these renter households are earning over $104,000 as lone person households...it’s not just low income earners, it’s not just high income earners.” Newcombe said land lease communities—where residents purchase a home but lease the underlying land from a community operator—were “quite unique compared to other living sectors… as an ownership/hybrid product”. And not only did it create a major opportunity to give asset‑rich or income‑constrained “silver renters” a more affordable, flexible path to secure housing but also a scalable, income‑stable asset class for institutional investors. According to CBRE research, Australia’s ageing population would see roughly 2.5 million to 3 million more people over the age of 65 added between now and 2040. ▲ A rendering of the $267-million GemLife New Gisborne in Victoria’s Macedon Ranges. It also showed 80 per cent of Australians aged about 75 owned their homes outright—with the average home value sitting at $1 million, representing a deep well of unencumbered liquidity. This unprecedented wealth of the incoming target demographic was another crucial element driving the value of the land lease sector, Chopra said. “The older generation has got a lot of wealth… and that wealth provides the firepower for building premium land lease communities,” he said. “So we can afford to get far more creative in what we bring to the market.” Chopra said with the wholesale institutionalisation of real estate in Australia already under way, interest rates and tax policy would were unlikely to be the primary market disruptors over coming years. “I think [the biggest surprise] is going to be this: there’s going to be some huge portfolio trades that continue because the sector can consolidate massively over the next couple of years.” He said the broader seniors living real estate space—which includes land lease, retirement villages and aged care—was now “run rating” at $3 billion a year in trading volume—accounting for between 5 and 10 per cent of all commercial real estate trading in Australia. “It’s grown a lot… it used to be tiny amounts, tiny bits.” Not anymore—the sleeping giant is now wide awake.

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Phil Bartsch
Sun 28 Jun 26

Land Lease Braces as Heavy-Hitter Investors Circle $12tn Living Sector

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