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RWSP Director Greg Bell on why time’s running out to buy commercial

By Greg Bell

As Sydney and Melbourne commercial property prices move out of the range of many buyers, more and more eyes are turning to the Gold Coast market. That's the message from Greg Bell, director of Ray White Surfers Paradise Commercial, in his latest market insights.

"Buyers just can't get value in the other east coast capitals anymore. They know interest rates will stay where they are for now, and have been seizing the opportunity to secure good yields on the Gold Coast."

But with a lot of heat already in the market, how long do investors have to get a foothold in the local commercial landscape?

Private investment on the rise

Greg notes that there is one kind of fund buying up Gold Coast commercial property a lot more often than the rest – private self-managed super funds.

"We're looking at cashed up funds between $2million and $10million a lot – not really big institutions, but family trusts and the like. They're coming out of the overheated Sydney and Melbourne markets, picking up good sites with a high potential for redevelopment down the line."

"Their focus is mainly on retail properties and really good, fairly new industrial sites – real estate that is well-suited to long leases. Retail properties are often service stations or shops along the Gold Coast Highway, while the industrial ones tend to be anything that can take on a long-lease international or national tenant."

"The office market on the Gold Coast is also improving, although it's very difficult for buyers. At the moment there is a lot of demand for entire office buildings, even just three to ten storeys. This lets people get access to a number of different consumer audiences with one purchase, acting as a one-stop shop. Some retail on the ground floor, some residential apartments, and some office space."

"However, this is in such high demand that when one becomes available, it's gone in a matter of days."

The benefits of commercial investment on the Gold Coast

The price rises that have seen investors move out of Melbourne and Sydney aren't just a higher price point – they means lower returns. For example, the ASX building was sold in Sydney for $330million recently, with The Australian reporting yields of well below 5 per cent.

This is a by-product of rents failing to keep pace with capital growth, and has seen many people turn to Gold Coast commercial for better yields.

"In Sydney, yields are often down between 3.5 per cent and 5.5 per cent," Greg says, "but here you're looking at a ceiling closer to 6.5 per cent."

"You can get properties here with yields of 7, 8, even 9 per cent, but you may not be guaranteed a good tenant. Here, with lower population growth, that's more of a problem than in Sydney – you can always find a new company to sign a lease on short notice there."

Stronger yields, easier price points, and healthy capital growth – it's no wonder demand has been so hot on a local level. But does that leave room for you?

Getting in before it's too late

"We're heading into the end of the financial year and the start of winter, so demand might dip a bit," Greg notes.

"However, from August-September onwards I think we're going to see incredibly high levels again. We'll be about six months out from the Commonwealth Games with a solid economy and employment, and the Budget wasn't too bad for us either."

"We've got some very good times ahead, but commercial buyers are going to have to act sooner rather than later if they don't want to miss out."

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