February 2016 – Gold Coast Office Market

22 February, 2016 / Vanessa Rader and Steven King

The Gold Coast Office market has shown some rebound in the second half of 2015 with another year of positive net absorption bringing the total vacancy position of the city to 13.6% the lowest rate since July 2008.

With international eyes on Gold Coast in 2018 with the Commonwealth Games there have already been some increases in investment by both local and off shore developers. This highlights the long term confidence in the region which has flowed through to these improved office results, furthermore economic conditions have slightly improved with employment levels up. The strata market continues to benefit from the low interest rate environment resulting in capital values for the strata market now back above 2010 levels averaging $3,330/sqm.

The vacancy position of the Gold Coast has been steadily improving over the past few years after the total market result peaked at 23.3% in July 2010 falling to its current low of 13.6% in January 2016. Some markets have fared better than others, with the best performer this period being Broadbeach recording vacancies of just 3.7% however Varsity Lakes/Robina have witnessed a dramatic drop in vacancies from 28.7% during January 2010 to its current low of 6.9%. This market however is home to modern accommodation which is in greater demand compared to the secondary accommodation in much of the Gold Coast. Surfers Paradise offers predominately secondary quality stock and has improved over the last few years yet still records vacancies north of 20%, currently at 22.6%; Bundall has witnessed a steady two year period with this market home to a strong mix of quality and size ranges currently representing 14,440sqm or 17.0%. Southport being home to approximately 150,000sqm of office stock has been steady over the past few years despite the disruption to the city with the light rail development; despite this completion this market has shown increase of vacancy to a three year high of 15.5%.

The Gold Coast market has shown some bright shoots with the vacancy position improving over the last couple of years. Post GFC rents saw a significant decline as incentive levels grew to over 30% putting even more pressure on an already low effective rent position. As incentive levels improved so have effective rents keeping face rents reasonably stable until mid 2015. Over the last 12 months the prime net face rent grew by 2.24% while the secondary market has outperformed increasing by 3.17% as demand for affordable space continues. Incentives for prime stock are in the 20%–25%
range with gross face rents averaging $365/sqm while secondary property remains affordable averaging $260/sqm.