Tough times for Gladstone commercial property as town adjusts to end of mining boom
Last year, the Gladstone property market was frequently wheeled out as yet another commodity-linked decline story.
After peaking in 2011 the port town's property market saw climbing vacancy rates and rental falls, leading to some claiming that Gladstone was "positioned to crash".
In June 2014, Terry Ryder wrote that "the worst is yet to come for Gladstone", with three big gas projects to wind up eventually. He cautioned readers then not to buy into media hype around the town, with some claiming that the market had stabilised.
Indeed, the Real Estate Institute of Queensland (REIQ) still termed Gladstone's vacancy rate of 4.2% "weak" in its September 2014 quarter report, although it noted that residential vacancy rates are trending downwards.
REIQ chief executive Antonia Mercorella said the latest Residential Rental Survey showed that "median rents in Gladstone and Mackay continue to ease". The survey recorded a 4.1% decline in Gladstone's median house price for the September quarter, to $374,000.
The market's downturn was attributed in part to an oversupply of housing, thanks to developers chasing incoming QGC workers who were then shifted to accommodation on Curtis Island. But the property market's results were not quarantined to the housing market, with some noting a reflection in the performance of commercial properties.
Last month, REIQ Gladstone chairman Mark Spearing wrote in The Gladstone Observer that "the feel locally is that business in general is very tough and the cost of business is affecting employment", noting a downturn in confidence.
"Our latest commercial property figures confirm this as there are several vacant commercial spaces around town," wrote Spearing.
"Have we conceivably transitioned from an overpriced market to an undervalued one in super-fast time? Time will tell."
While many agree that the property market was over-valued a few years ago, some, like Commercial Property Specialist Dale Ware of Ray White Gladstone, say the "doom and gloom" headlines are unwarranted.
"There's a lot of doom and gloom about the construction phase of the gas projects coming to an end," Ware tells Property Observer.
"Yes, one of the plants is winding down, but two are nowhere near finished, and probably have another 12 months to go."
He notes that some level of market fluctuation is typical for Gladstone, and that in his 35 years of business in the town, he's seen the market go quiet, only to "go crazy again" a few weeks later.
"That's what Gladstone's about."
Ware believes that Gladstone's reputation is in part due to some associating the town with the mining industry.
"We're not a mining town at all. We're a port more than anything," says Ware.
"We export aluminium, grain, coal, power and gas. Even though we're linked to the mining industry, we're not a mining town."
Ware comments that coal mining towns further west like Emerald and Blackwater are experiencing a worse downturn than Gladstone.
"We're alright. It's just that two years ago, we had an enormous boom.
"We've come off that high, and everyone thinks they've had their throats cut." He notes that Gladstone's market was only at its recent peak "for 18 months or so".
He also notes that while rents are "coming down a little bit", he doesn't believe there's been any large increase in the number of vacant commercial properties.
"I've done probably six leases in the last six weeks, which is probably three times what we were doing last year", says Ware. He predicts that when, in September, the Curtis Island workers camps are dismantled, work will be created. That will impact the commercial property space, says Ware, with an increased need for storage space.
This retail and office space at 91 Goondoon Street in Gladstone Central is currently listed to rent at $32,800 per annum, or just over $135 per square metre, per year.
An industrial and warehouse space in Gladstone Central, at 1/4 Roseanna Street, is available for $1,600 (plus GST) per month, equating to $218 per square metre, per year.
In his investor warning last year, Ryder wrote that despite its price volatility, Gladstone has a "huge future" as "Australia's leading industrial city".
Ware believes the mix of industries in Gladstone means the market won't stay down.
"We've got powerstations, aluminimum plants, a smelter, the gas, [ammonium nitrate producer] Orica, the coal, the port, the grain – they can't all be quiet at once.
"To succeed in business you've got to be diverse. And Gladstone's diverse", says Ware.
Picture courtesy of Wikimedia Commons.