This article was provided by Trilogy Funds.
Project pipelines remain strong across the commercial property development sector with clear opportunities accessible to forward-thinking brokers and property developers.
Read on as Trilogy Funds share updates on the easing of construction costs, demand for apartments, non-bank lenders’ role in the market, and areas of opportunity.
Some positive news for construction costs & building materials
While construction costs are forecast to continue climbing across Q4 2022, experts believe they will ease in 2023[1].
According to Housing Industry Association chief economist Tim Reardon, there has been a marked improvement in the availability of some building materials[2] – including timber – and more builders are experiencing lessening[3] supply pressures The Urban Developer reports.
Trilogy Funds’ head of lending and property assets Clinton Arentz is witnessing this in his dealings with brokers, developers and third-parties, and notes, “The easing construction cost inflation is enabling developers to finalise feasibility models with more certainty.”
He is pleased to report that projects in the Trilogy Monthly Income Trust loan book are generally tracking well.
“We have not encountered any recent delays with product suppliers and sub-trade markets are more readily available,” Mr Arentz said.
“An uptrend in building approvals is also visible, thus, projecting a steady volume of construction commencements..”
Rental crisis to sustain demand for apartments
SQM Research reported in September that national rental vacancy rates for August were less than 1%[4].
According to Master Builders Australia, this pressure is unlikely to ease until at least 2026, given that 200,000 [5] new homes would be required each year to accommodate long-term population growth.
Students and other temporary migrants returning to Australia is exacerbating the apartment shortage in capital cities. Experts such as the Regional Australia Institute report that smaller cities and towns [6] also have a major undersupply of affordable accommodation.
This has sparked an increasing need for development finance [7].
Trilogy Funds is currently funding 160 property development projects, of which 32% are residential apartment construction (as at 30 September 2022).
A high level of experience in this sector means the Trilogy Funds team is able to tailor loan terms specifically to your clients’ projects, best enabling them to reach their projects goals.
Non-bank lenders playing a vital role in the market
As banks pull back from property development finance, non-bank lenders are playing an increasingly central role, ranging from home loans to commercial construction loans.
Ross Perkins, a member of the Trilogy Funds lending committee and ex head of M3 Property, says that non-bank lenders are an attractive finance option for those that are focussed on ensuring project momentum and reducing the time to turn soil.
For the Trilogy Monthly Income Trust loan book, Mr Arentz reports: “We currently have a solid pipeline of loans being prepared – most of which have commitment fees already repaid and consultancy reviews underway.
“Sales of projects have held up well for our loans and repayments are occurring, facilitating further lending opportunities via our pooled mortgage fund.”
Areas of opportunity for brokers & developers
Unsure where your next opportunity lies? Consider:
- Industrial & logistics: Australia currently has the tightest industrial & logistics vacancy rate in the world [8]. The sector is attracting billions [9] in foreign investment as short supply continues to create development opportunities, says Australian Financial Review reporter Larry Schlesinger.
- Renewable energy: Regional property markets are set to be boosted by Australia’s renewable energy boom [10] according to InvestorKit’s September white paper including Toowoomba, Rockhampton, Tamworth-Armidale, Dubbo, and the Latrobe Valley.
- Social and affordable housing: Councils and governments have signalled intentions to sharply increase investment in social and affordable housing [11], and the market for Specialist Disability Accommodation [12] is developing rapidly.
- Office: ‘Green’ office buildings with high energy ratings are proving increasingly popular with both tenants and investors [13], while demand for high-quality office space in city-fringe locations is intensifying [14] The Urban Developer shares.
- Retail: According to Colliers, demand for big-format retail [15] sites is strong. More Woolworths Metro, Coles Central and Aldi Corner Store outlets [16] are also making a comeback.
Trilogy Funds offers tailored property development finance of $3 million to $40 million to the residential, commercial, industrial and retail sectors.
Visit: Trilogy Funds.
This article is issued by Trilogy Funds Management Limited ABN 59 080 383 679 AFSL 261425 (Trilogy Funds) as responsible entity for the Trilogy Monthly Income Trust ARSN 121 846 722. Application for investment can only be made on the application form accompanying the Product Disclosure Statement (PDS) dated 30 September 2022 and by considering the Target Market Determination (TMD) dated 30 September 2022 for the Trilogy Monthly Income Trust ARSN 121 846 722 available here. The PDS and the TMD contain full details of the terms and conditions of investment and should be read in full, particularly the risk section, prior to lodging any application or making a further investment. All investments, including those with Trilogy Funds, involve risk which can lead to loss of part or all of your capital or diminished returns. Trilogy Funds is licensed to provide only general financial product advice about its products and therefore recommends you seek personal advice on the suitability of this investment to your objectives, financial situation and needs from a licensed financial adviser. Investments with Trilogy Funds are not bank deposits and are not government guaranteed. Past performance is not a reliable indicator of future performance.
This article has been prepared for existing and prospective borrowers and brokers and provides information only about Trilogy Funds’ lending services. Trilogy Funds Management Limited (Trilogy Funds) ABN 59 080 383 679 AFSL 261425 is not a licensed credit provider and does not make loans regulated by the National Credit Code. The source of Trilogy Funds’ loans may include managed investments schemes registered with ASIC, as well as other private lending arrangements with high net worth investors. If you would like more details on our investment opportunities, please contact us.
Clinton Arentz | Trilogy Funds
Clinton has over 25 years’ experience in commercial property development and management, asset and facilities management, and project delivery. As Head of Lending & Property Assets, he is responsible for Trilogy Funds’ lending team, overseeing the growth of the diverse construction loan portfolio entailing projects across Australia’s residential, commercial, industrial and retail property sectors. He is passionate about providing property developers with tailored and agile funding solutions for site acquisition, construction and residual stock. Clinton also oversees the acquisition and management of Trilogy Funds’ property assets, applying his experience in risk management, capital structuring, acquisitions, and property syndications.
