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Gold Coast Office Market Small Suites Report

By Jared Hodge

Gold Coast Office Market Small Suites Report

The six months to January 2018 has been a standout start to the year for the Gold Coast office market, resulting in positive take up of space coupled with withdrawal of stock flowing through to compression in total vacancy to 10.6%.

This is the lowest rate recorded for the total Gold Coast market since July 2008. Broadbeach is the smallest of these markets and has shown improvement this period with a low vacancy rate of just 6.6% down from 8.7% six months prior. Robina/Varsity Lakes is slightly up, yet consistent on results for the last 18 months recording 7.2% vacant. Continuing the theme of quality beachside locations, Surfers Paradise has been the standout performer this period recording 3,063m² net absorption and reducing vacancy to 12.0%, more than halving their vacancy of just three years ago. Bundall saw some small negative movement in absorption to record an increase of vacancy to 11.8% while Southport continues its volatile trend reducing this period to 13.2% off the back of withdrawal of resulting in the -1,258m² in take up. The impacts of the upcoming Commonwealth Games are uncertain for the office market, however we do expect some reduction in enquiry levels during this time with tenants reluctant to relocate during the anticipated disruption to traffic flows and access across the city.The Gold Coast office leasing market continues to show steady rental results. Enquiry levels in the late part of 2017 did slow earlier than prior years, however the start of 2018 has been unseasonably active, bringing some positive sentiment to the start of the new year. Activity has been particularly high across all precincts of the Gold Coast with Bundall and Southport showing high interest and favourable results early in the year, most notably within the 200–300m² size range. The upcoming Commonwealth Games have raised some concerns regarding access and transport with some prospective tenants putting off their relocation’s until these anticipated disruptions end. This may see another lull in activity during the late March–April period before rebounding. While there have been positive levels of enquiry this hasn’t translated into increases in average rents, however we have seen some downward movement in incentives, particularly in the B grade sector. These have remained reasonably consistent with the prior period with prime smaller stock in the $320 to $380/m² range averaging $350/m² while Secondary in the more affordable $230 to $280/m² price range. Larger, A grade assets continue to dictate rents in excess of these rates up to $450/m² on a gross basis.

Confidence remains high across the Gold Coast and the nearing Commonwealth Games has given the city an injection of energy and optimism. Low interest rates continued to drive activity across commercial markets on the east coast as more investors look to spread risk and diversify their investments. Investment into the strata office market has been high during the 2017 calendar year representing $49.665 million which is 47.73% up on 2016 results and 148.03% more than the 2015 period. The bulk of buyers have been private, local investors looking for alternative investment options at reasonable yields, owner occupier activity however does continue particularly for small businesses opting to own their own space in anticipation of business expansion which has driven some price growth. Turnover level has been heavily skewed towards investment in the Robina/Varsity Lakes region representing $22.763 million followed by the Surfers Paradise/Broadbeach region representing $12.960 million. These two markets representing 71.93% of the total sales stock for 2017 which is in contrast to the prior year where Southport was the major contributor to sales activity. This period Southport accounted for $8.723 million followed by Bundall with just $4.329 million, these markets being the most affordable with the average sale price in these markets recording $363,472 and $393,500 respectively.

Improved market sentiment has resulted in a clear improvement in capital values achieved across the Gold Coast strata office market over the past two years, with this more recent uptick being driven by many smaller investors urgently seeking investment options during this time of low interest rates and falling yields. The sales volumes achieved in 2017 highlight this increase in activity however volatility still remains in some of the smaller markets. Across the total Gold Coast strata office market, capital values have increased 15.28% compared to average 2016 results to $3,685/sqm. The large uptick in values for Coolangatta is representative of the limited turnover which has been achieved in this market; Surfers Paradise/Broadbeach has witnessed a high level of turnover yet has represented a small reduction to the average of -1.79%, this average value by $3,564/m² stabilising after the large increases of 2015. Southport however has turned around the improvement which was growing over the last few years now recording an average of $3,086/m² or down -11.71% in the last year; Robina/Varsity Lakes continue to be the most expensive of office markets growing at a high rate for the last four years to $4,324/m². Bundall remains one of the most affordable regions across the Gold Coast at just $2,740/m², yet this market has seen a 16.34% improvement compared to 2016 results.

Source: February 2018 – Gold Coast Office Market Small Suites Report

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