Gold Coast office market robust: HTW
Moving into 2017, the Gold Coast commercial property has continued to reflect strong market conditions, say valuation firm Herron Todd White in their April report which also sees Gold Coast approaching the peak of market position.
Recently released PCA data indicates the across market vacancy level at January 2017 was 12.2 percent. This is down from 14.3 percent in July 2016 and 13.2 percent in January 2016.
Continuing the trend over the past several years, we are unaware of any planned new office buildings for 2017 apart from some smaller developments in areas such as Ashmore Road, Benowa targeting the medical sector. On this basis, the vacancy level on the Gold Coast is anticipated to improve (reduce) further moving forward.
Sale transactions to date in 2017 suggest continuing robust interest. An example of this is the now publicly reported sale of 183 Varsity Parade, Varsity Lakes for $11.8 million. This is a 32.5 percent increase on the previous sale in December 2014 at $8.9 million.
The property has been purchased by the Clarence Property Group, a long term participant in the Gold Coast commercial market and in particular the office sector over the past few years. This two-level building of 3,153 square metres is reportedly fully leased, although net income and yield have not been disclosed. The sale reflects $3,742 per square metre on lettable area.
At the other end of the spectrum is 19-21 Gardenia Grove, Burleigh Heads, which settled last month for $2.9 million. This is a converted squash centre in a beachside location providing 1,061 square metres of net lettable area. It is also fully leased, but shows a low WALE of two years. The sale reflects $2,733 per square metre and a passing yield of 7.94 percent.
“We note there are several other commercial office buildings currently listed for sale which we anticipate when sold will demonstrate yields at or possibly 25 basis points lower than 2016.”
Of particular interest will be how the market place perceives the expansive Bundall Corporate Centre, which has an EOI campaign closing 23 March 2017. This property comprises two existing office building with 21,111 square metres of lettable area, but with a further 15,500 square metres of developable land that could provide an array of opportunities for further office space, retailing, residential apartments or combinations thereof. This is a large, commercial property ticket item for the Gold Coast, having sold in the past a couple of times pre-GFC at circa $100 million and then post-GFC at circa $60 million.
In respect to the office rental sector, commercial agents are also reporting good conditions with reported uplift in enquiries, uplift in rental levels and stabilisation or reduction in the level of incentives.
Typically, rental rates for A grade stock ranges between $450 and $500 per square metre gross plus car parking; B grade stock between $350 and $450 per square metre gross plus car parking, whilst C and D grade stock ranges between $225 and $300 per square metre plus car parking. Incentives would now be expected to represent circa 7 percent to 8 percent of lease term rental.
The Gold Coast strata office market has also continued on its reasonably strong path into 2017, again buoyed by owner-occupiers taking advantage of the low interest rate environment. Value rates exhibited by good quality strata office space on the Gold Coast typically reflect between $3,500 and $4,500 per square metre inclusive of car parking and between $2,000 and $3,500 for secondary stock depending on size, location and physical attributes. These are similar levels to 2015, although the median rate in each category has probably increased circa 5 percent.
“Moving through 2017, we would expect the buoyant conditions to be maintained on the back of sustained low interest rates and ongoing benefit of planned infrastructure associated with the Commonwealth Games in 2018.”
“However, we do have reservations that the market is becoming over heated.”
Further, global conditions, including a change of President in the US and the possibility of diplomatic tensions moving forward could have implications for the Australian property market overall, conclude HTW.