Over the last few years coastal office markets, in particular Gold Coast and Sunshine Coast, saw a strong uplift in occupier demand while the rest of the nation battled with work from home pressures and reducing their office footprint, resulting in growing vacancy. After a couple of strong results from our coastal markets across the country, borne out of the pandemic’s population shifts outside of metropolitan regions and interstate movements into south east Queensland, has the appeal of these office markets maintained?
Both Gold Coast and Sunshine Coast have recorded strong quarterly gains in new business starts well before COVID hit, however, these increases accelerated in 2019 to 2023, with peak business numbers recorded in both cities in June 2023 before slightly falling away. Strong gains in population and business numbers resulted in an increased need in accommodation, from residential homes through to retail, childcare, medical, industrial and office space to cater for these additional people. As a result we have seen office vacancies for these two markets reduce from the highs in 2019 of 11.6 per cent at the Gold Coast, and 21.9 per cent at the Sunshine Coast, to just 6.4 per cent and 5 per cent respectively in 2024. Interestingly, we have seen an opposite trend in the NSW coastal CBDs of Newcastle and Wollongong hindered by supply, population uncertainty and differing business trends.
For Wollongong, south of Sydney, this market has historically been difficult to attract new business. The smallest of all major office markets recorded across the country, it has had an injection of population and a growing university presence slowly bringing new vibrancy to the city centre. More recently, however, the addition of new stock has taken an extended period to absorb, keeping vacancies elevated, albeit falling this period to 14.7 per cent. For Newcastle, a much larger, established centre to the north of Sydney, gains in population have not been enough to catapult its CBD to the next level. Historically, vacancy has seen cyclical results with lows in the early 2000s sub 6 per cent, however, current levels hit new peaks at 16.4 per cent off the back of a number of uncommitted projects completing, growing the total market to just shy of 300,000sqm, larger than Sydney’s Chatswood.
Over the last 12 months we continued to see some markets improving better than others. For the Gold Coast, the lack of new stock has restricted further improvement with tenant requirements continued for prime grade stock with larger floorplates, unable to be fulfilled. While vacancies have increased this period from 6 per cent to 6.4 per cent, the flight to quality is clear, with A-grade stock recording just 3.3 per cent vacancy, while B-grade increases. For Sunshine Coast, negative take up was recorded for the first time since 2015. Net supply showed no change given the withdrawal of stock in line with new supply. However, similar to the Gold Coast, demand remains for high quality stock, with A-grade vacancies at their lowest rate on record at 3.4 per cent thanks to over 2,000sqm of positive take up.
For the NSW markets, there have been some encouraging results. Wollongong has recorded the best annual net absorption of the four markets, with newer stock growing prime stock and vacancies contracting - a positive sign for the region. While Newcastle continues to be slow to move, hampered by uncommitted supply added to the market keeping A-grade vacancies elevated, the overall positive net absorption across the total market however is an encouraging sign.
Will these markets continue to ride their population wave? Certainly some will do so better than others, there have been some signs of population movements back into metropolitan markets however the overall reduction in new business starts may indicate some waning in new demand. Despite this, demand for high quality spaces and the expansion of businesses are a tell-tale sign of a local economy growing in vibrancy, therefore optimism remains high.
