GOLD COAST OFFICE OVERVIEW Q1 2015
Gold Coast OVERVIEW Gold Coast office stock at January 2015 totalled 472,022sqm, up by just over 12,000sqm over the past year. The only new building completed in 2014, however, was 25-27 Elkhorn Avenue, Surfers Paradise (2,319sqm) during the first half of the year. The majority of stock changes were via the return of refurbished space in Bundall, including the Gold Coast City Council owned Waterside East, West and 8 Karp Court. Upcoming supply in 2015 will be focussed on Robina where City Pods stages 3 and 4 will come on line, comprising around 1,430sqm each. Improved local business conditions appear to have consolidated in 2014, with annual net absorption totalling 16,835sqm. This was, in fact, the fourth consecutive year of positive take-up on the Gold Coast, with the market absorbing 44,000sqm of space in this period. With development sites on the Gold Coast in demand at present, particularly residential, office space demand from development and associated companies has been strong, as has demand from general professional services firms on the back of an improving local economy. Annual take-up was amongst the strongest of the 17 major non-cbd office markets monitored by the Property Council of Australia, just behind the Brisbane Fringe (with 30,000sqm of positive take-up) and Chatswood in Sydney (with 18,900sqm of positive take-up). Annual take-up was negative in nine of the remaining markets, whilst amongst the CBD markets, just Sydney and Melbourne recorded positive take-up. The Brisbane CBD recorded 33,100sqm of negative take-up, the second year in a row of negative absorption. Total vacancy edged slightly higher over the latter half of 2014 to sit at 15.2% in January 2015, although largely a result of the impact of refurbished stock returning to the market. In general, vacancy has been trending down since its peak of 24.1% at the start of 2011 and the January 2015 vacancy compares with recorded vacancy of 16.7% at the start of 2014. Interestingly, for the first time the overall vacancy rate is now below that of the Brisbane CBD. A major addition to vacancy in the latter half of 2014 consisted of a Gold Coast City Council expiry of 3,500sqm within 194 Varsity Parade. Approximate 2,500sqm will be removed from the vacancy, however, with leases committed and commencement dates in the first quarter of 2015. Prime vacancy sat at 18.9% in January 2015 (compared with a peak of 40.8% in mid-2010) and was down slightly over the course of 2014. Secondary vacancy (at 13.8%) edged slightly higher.
There remains a significant rental differential between A-grade stock and secondary stock. The market has struggled to accept the quality of the A-grade stock warranted the extent of the gap evident. With much of the A-grade vacancy undergoing refurbishment, however, the rental differential is likely to become more representative of quality moving forward. All precincts with the exception of Southport showed improved performance over the full year with Broadbeach (7.6%) and Robina/Varsity Lakes (10.4%) continuing to exhibit the lowest vacancy rates. Slight vacancy increases occurred in Bundall and Robina-Varsity Lakes over the final six months of 2014. Significant transactions of Q4 2014 and Q1 2015 include: - Bank Of Queensland securing 1,355sqm at 169 Varsity Parade, Varsity Lakes; - Arcadia College occupying 1,200sqm within 1 Bellvue Drive, Varsity Lakes; - Dickfoss Dunn Accounting securing 538sqm at 10 Cloyne Rd, Southport; - Wanda Ridong securing 350sqm at 50 Cavill Avenue, Surfers Paradise; and - Coral Homes relocating to 194 Varsity Parade, 1,700sqm; - Cambio Group securing 638sqm at 9 Ouyan St Bundall; and - Fixed Price Car Servicing moving into 451sqm at 50 Cavill Avenue. The Gold Coast Light Rail is now operational, and as well as clearing the disruptions caused by construction, should provide long term benefit to the business precincts it currently services: i.e. Southport, Surfers Paradise and Broadbeach. Southport was designated a Principal Development Area in October 2013 by the Queensland State Government. This has seen the relaxation of planning rules around permitted uses which has already seen an influx of education users looking to establish in the precinct. We expect this will continue with majority of enquiry from new businesses to the Gold Coast, this will further assist with take-up in the Southport precinct. The table below provides a summary of the state of the Gold Coast office market as at January 2015 Rental rates continue to vary across precincts and are driven by supply levels. The likes of Broadbeach and CBD Robina are achieving higher rents due to their lower vacancy rates whereas the softer markets of Bundall, Surfers Paradise and Varsity Lakes remain more price competitive. Broadly, however, rents for established A-grade stock are in the $330/sqm to $390/sqm range (net face). Secondary stock remains steady achieving $200/sqm to $300/sqm (gross face) with incentives steady at 15% to 20% across precincts, depending on length of lease term.
Precinct SNAPSHOTS Southport remains the largest office market precinct on the Gold Coast, with 150,620sqm of stock, although stock levels have increased only slightly since the start of 2010. Vacancy at January 2015 sat at 14.8%, with negative net absorption of 1,754sqm over the past year. Despite a rise in vacancy over the past year, the rate still sits well below the peak of over 22% seen in mid-2010. This tightening has been largely driven by the steady but gradual absorption of tenanted and owner-occupied space at Southport Central which added significantly to stock levels. Over the past 12-years, activity in Southport has generated over 54,000sqm of net take-up, with positive take-up in ten of those years. robina/varsity lakes has seen a significant tightening in vacancy over time, down from 29% at the start of 2010 to its present mark of 10.4%. Positive take-up of 3,642sqm occurred over 2014 to January 2015, with almost 29,000sqm of space absorbed over the past five years alone. The split in vacancy between the CBD Robina and Varsity Lakes components of the precinct has closed with some larger areas of vacancy occupied in Varsity Lakes. After growing substantially from 2003 to 2010 (more than doubling in size), net supply additions over the past five years have totalled just 5,700sqm, with the current stock at 135,714sqm. It is still expected that in the medium-term, the precinct will overtake Southport as the largest Gold Coast office precinct. SURFERS PARADISE continues to record the highest vacancy rate of all of the Gold Coast office market precincts, although at 25.1%, vacancy has fallen from its January 2014 record high of 29.2%. Net absorption for the year totalled 4,514sqm, the strongest aggregate seen in the market since 2004. The precinct supported for the only significant new build in the market in 2014, the 2,319sqm 25-27 Elkhorn Avenue. Along with Southport and Broadbeach, Surfers Paradise should benefit over the medium-term from the operation of the Gold Coast Light Rail. bundall is a precinct undergoing transition, with stock impacted as older assets are withdrawn for alternate uses and Gold Coast City Council acquiring Waterside East and West, subsequently refurbishing the buildings for owner occupation. Stock levels sat at 85,100sqm at January 2015 with the vacancy rate of 18.0% still the second highest of the Gold Coast office market precincts. The market, however, did see positive net absorption 9,229sqm over 2014 to January 2015, recording consecutive years of positive take-up for the first time since 2005.
broadbeach with 29,141sqm of stock, is the smallest of the Gold Coast office precincts. Vacancy at January 2015 sat at 7.6%, down from the rate of 11.7% recorded 12-months earlier. This vacancy compares with the spike to 35.5% at January 2011, coinciding with the completion of the Oracle development. Since that time, over 8,000sqm of space has been absorbed, with the precinct overtaking Robina/Varsity Lakes as the tightest market on the Gold Coast. For further information, please contact: nick selbie Associate Director - Office Services 07 5581 2000 0423 414 495 nick.selbie@cbre.com.au CBRE (C) Pty Ltd Level 3 Oracle East Tower 6 Charles Avenue Broadbeach QLD 4218 Disclaimer: CBRE Limited confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.