Gold Coast strata office market has robust 2018

TOTAL sales activity across the Gold Coast strata office market remained robust throughout 2018, according to Ray White’s upcoming Between the Lines research for Gold Coast Small Suites.

The data showed after a strong 2017 result, low interest rates continued to be a driving force for private investors in this market, despite some uncertainty surrounding financing availability.

Ray White’s Head of Research Vanessa Rader said following an end-of-year rush, 2018 saw $42.79M change hands.

“While this is down 13.84 per cent compared to the busy 2017 period, it remains the second highest sales over the past ten years,” Ms Rader said.

“Confidence continues to be high across the Gold Coast post-Commonwealth Games, with much energy and optimism around business growth, which has resulted in some improvements in employment.

“We’ve seen both local investors and owner occupiers seek investment into the office market to shelter from volatile occupation costs and in anticipation for business expansion, as well as securing a competitive yielding asset.

“Volumes have been highest in Southport and Robina/Varsity Lakes, with these being the two largest office submarkets across the Gold Coast, offering modern facilities.

“Collectively, these two markets represented 68.67 per cent of the 2018 total sales stock, with an average sale price of $840,000.

“While the Surfers Paradise and Bundall regions both offer more affordable office product, with average sale prices of $536,500 and $284,500 respectively.”

Ms Rader said sentiment continued to be positive for the Gold Coast office market.

“Capital values continued to show upward momentum, with this resulting in the average Gold Coast value increasing for the sixth consecutive year,” she said.

“Currently averaging $3,770/sq m, this is up 2.31 per cent on last year’s result, and has recorded 6.97 per cent annual change over the past five years.

“Bundall remains the most affordable region across the Gold Coast and has shown several years of consistent growth. At just $3,013/sq m, this market is up 9.96 per cent on the last year, and has shown 4.40 per cent annual improvement over the last five years.

“The largest growth in values has come from Southport, albeit due to the downward correction in values achieved during 2017.

“Currently averaging $3,680/sq m, this is up 19.26 per cent over the last 12 months, representing a 5.29 per cent increase compared to 2016 results.

“Surfers Paradise/Broadbeach has witnessed a high level of turnover in 2018 representing a small reduction of 3.42 per cent, this average of $3,446/sq m is the second year of decline after a high level of increase in this market during 2015.

“Another market which has felt a reduction in values has been Robina/Varsity Lakes, currently averaging $3,914/sq m. This is down 9.50 per cent over the last year, an increase in vacancies in this market being of concern for some buyers.”

Ray White Commercial Gold Coast Office Leasing Specialist Renee Hughes said after some slowdown in leasing activity post financial year, the run to the end of the year saw some increase in activity, continuing the improvement in rental rates of 2018.

“Levels of enquiry have started 2019 similarly to the close of 2018, with demand elevated across all size and quality grades,” Ms Hughes said.

“In terms of location, enquiry has been high across all precincts, however Bundall has been the stand-out performer with occupiers looking towards the more affordable product in a central location.

“Professional Services continue to be the industry most active, resulting in incentives reducing to around eight per cent, putting further downward pressure on effective rents.

“After a prolonged period of steady rental rate results, 2018’s increased demand translated into small face rental growth, continuing through to the end of the year.

“Prime smaller stock currently ranges between $320 to $380/sqm gross, averaging $365/sqm (2.24 per cent annual growth).

“While Secondary, in the more affordable $230 to $300/sqm price range, has held consistent at $260/sqm over the last two years.

“A-grade assets that offer large floorplates in quality locations continue to dictate rents in excess of these rates, upwards of $500/sqm on a gross basis, with an incentive greater than 10 per cent.”