The Gold Coast office market has recorded its lowest vacancy rate for more than nine years as the looming Commonwealth Games keeps confidence levels high.
Investment into region’s strata office market and strata capital values has also increased significantly, according to the latest Ray White Commercial research — Between the Lines Gold Coast Office Market Small Suites Report February 2018.
Ray White Commercial head of research Vanessa Rader says it has been a standout start to the year for the Gold Coast.
“Positive take-up of space coupled with withdrawal of stock has flowed through to compression in total vacancy to 10.6 per cent,” Ms Rader says.
“This is the lowest rate recorded for the total Gold Coast market since July 2008.”
Ray White Commercial Gold Coast commercial sales specialist Steven King says Broadbeach, the smallest of the region’s markets, has shown improvement for the six months to January 2018 with a low vacancy rate of just 6.6 per cent — down from 8.7 per cent for the six months prior.
“But Surfers Paradise has been the standout performer this period, reducing vacancy to 12.0 per cent and more than halving its vacancy of just three years ago,” Mr King says.
The Gold Coast office leasing market continues to show steady rental results although a Commonwealth Games-related dip is expected in the second quarter.
Ray White Commercial Gold Coast office leasing specialist Renee Hughes says: “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 to 300sqm size range.
“The upcoming Commonwealth Games has raised some concerns regarding access and transport with some prospective tenants putting off their relocations until these anticipated disruptions end. This may see another lull in activity during the late March-April period before rebounding.”
While positive levels of inquiry had not translated into increases in average rents, incentives have shown some downward movement, particularly in the B-grade sector.
At $49.665 million, investment into the strata office market during the 2017 calendar year was 47.73 per cent up on 2016 results and 148.03 per cent more than the 2015 period.
“The bulk of buyers have been private local investors looking for alternative investment options at reasonable yields,” Mr King says.
“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.”
Investment in the Robina-Varsity Lakes region represents $22.763 million, followed by the Surfers Paradise-Broadbeach region at $12.960 million.
“These two markets represented 71.93 per cent of the total sales stock for 2017 which is in contrast to the prior year where Southport was the major contributor to sales activity,” Mr King says.
“Confidence remains high across the Gold Coast and the nearing Commonwealth Games has given the city an injection of energy and optimism.”
Smaller investors urgently seeking investment options during this time of low interest rates and falling yields have driven a recent uptick in capital values across the Gold Coast strata office market, which have been increasing over the past two years.
However, Ms Rader says volatility remains in some of the region’s smaller markets.
“Across the total Gold Coast strata office market, capital values have increased 15.28 per cent compared to average 2016 results to average $3685 per sqm,” she says.
Coolangatta’s increase in value between 2016 and 2017 is representative of the limited turnover which has been achieved in this market. In contrast, Southport — which had been showing improvement over the past few years — has dropped 11.71 per cent in the past year.
Robina-Varsity Lakes continues to be the most expensive Gold Coast region in terms of capital values while Bundall remains one of the most affordable, despite a 16.34 per cent improvement on its 2016 results.