Between the Lines
Commercial Research
Between the Lines Gold Coast Strata Office August 2014
The Gold Coast Strata Office market, much like the broader Gold Coast markets has been through a prolonged period of volatility. Market activity and values where reasonably strong pre GFC however responded adversely in 2008 and beyond due to the high levels of supply which were anticipated to enter the market.
Strata Office Volume of Sales
There is a reasonably high volume of strata office property spread across the Gold Coast region, major office locations include Southport, Surfers/ Broadbeach, Bundall and the most recent office precinct to the area Varsity Lakes/Robina. Over the
$90
80
$80
70
$70
60
$60
50
$50
40
$40
30
$30
20
$20
10
$10
-
Millions
No. S ales
Value and Number 90
$2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* B undall
S urfers/B roadbeach
S outhport
R obina/Varsity
B urleigh/C oolangatta
Volume of S ales (R HS )
Source: Cityscope, PIMS, Ray White (*to June 2014)
Strata Capital Values $6,000.00 $5,000.00 $4,000.00 $3,000.00 $2,000.00 $1,000.00 $2007
2008
2009 2010 2011 2012 S urfers/B roadbeach R obina/Varsity Total G old C oast
Source: Cityscope, PIMS, Ray White (*to June 2014)
past ten years, the highest volume of sales has come from development in this new location together with new assets within Southport. Southport has been recipient to the greatest volume of new stock in the period immediately prior to the GFC, which had an immediate negative impact on this market. With a large volume of new or under construction stock, high settlement risk, finance issues and high vacancies; this resulted in capital values needing to reduce quickly to absorb stock. After repricing and completion of stock there was some increase in investment which is notable in the 2010 period where close to 90 transactions were completed with over $40 million turning over, Southport represented 67 of these sales mostly by opportunistic investors looking to capitalise on the massive market falls.
This high supply situation has had the most devastating effect on capital values for the Southport market. Current average values have shown some rebound
By Precinct ($/sqm)
2004 2005 2006 B undall S outhport B urleigh/C oolangatta
During this time of economic uncertainty, Gold Coast as an office location was one of the worst hit markets resulting in rapidly rising vacancy levels peaking at 22.7% in the second half of 2010 which had a negative impact on both the rental and investment market.
2013 2014*
to $2,550/sqm after dipping to the low of $2,280/sqm in 2012; this 55.2% less than the high achieved pre GFC which averaged $5,685/sqm. The Varsity Lakes/Robina market also resulted in an immediate fall in values post GFC falling from $5,280/sqm in 2008 to $4,440/sqm the following year, a stable value was achievable for this region the following years before falling more recently to the current rate of $3,300/sqm, 37.4% down from its peak. Markets with limited transactional activity such as Bundall and Burleigh/Coolangatta have shown a more stable result in average capital values, albeit showing some negative affects to the economic slowdown of the 2008–2011period. Bundall currently averages a value of $2,500/sqm with Burleigh/Coolangatta averaging $3,540/ sqm albeit these averages are based on a small sample and transactions in the sub $500,000 price range.
Office Vacancy
The vacancy position of the Gold Coast has been steadily improving over the past few years after the total market result peaked at 23.3% in July 2010 falling to its current low of 15.0% in July 2014. Some
Gold Coast markets 35% 30% 25% 20% 15% 10% 5% 0% B undall
S urfers Paradise J ul-12
S outhport
J ul-13
Varsity Lakes/ R obina J an-14
B roadbeach Total G old C oast J ul-14
Source: Property Council of Australia
Gross Face Rents Suites sub 500sqm ($/sqm) 500 450 400 350 300 250 200 150 100 50
J un-02 Dec-02 J un-03 Dec-03 J un-04 Dec-04 J un-05 Dec-05 J un-06 Dec-06 J un-07 Dec-07 J un-08 Dec-08 J un-09 Dec-09 J un-10 Dec-10 J un-11 Dec-11 J un-12 Dec-12 J un-13 Dec-13 J un-14
0
Prime
S econdary
Source: PIMS, Ray White
The Gold Coast office market has started to turn a corner, improvements in investment into the city has started to translate into improved confidence and activity in the city. With the tram project now completed and the spotlight moving to Gold Coast as the next Commonwealth Games host, there is improved sentiment. With no major supply projects expected to enter the market beside the usual refurbishment projects which are offset by small withdrawals, this will help speed up the recovery. Encouragingly reducing vacancies and incentives are having a positive uplift on effective rents, which will also improve the attractiveness of investment. Strata office capital values are still well behind historic highs, couple this with the current low interest rate environment may also see owner occupier investment back into this market improving values and volumes.
markets have fared better than others, with the best performer being Varsity Lakes/Robina which has seen a dramatic drop in vacancies from 28.7% during January 2010 to its current low of 9.8%; this is due to the aggressive rental rates on offer for prime, near new accommodation. The smaller markets of Surfers Paradise, Broadbeach and Bundall have had more varying results pending quality, size and location of stock. Southport has been a steady performer, however this period witnessed an uptick in results to 14.2% which is still well below the 22.3% recorded in July 2010. Encouragingly, the performance of the total Gold Coast market is sound given the continual decline in overall vacancy; B grade assets have attracted the best results due to more realistic expectations around face rents.
The Gold Coast rental market has reacted as expected to the halt to demand post GFC. Face rents immediately saw a large decline of over 30% for some markets with the average prime market falling as much as 16.5% over an 18 month period. Couple this reduction in face rents together with a swift increase in incentives over 30% for some assets, the overall effective rental position saw fell around 50% in the secondary market while the prime market didn’t fare much better resulting in a 40%+ reduction over this short period. Encouragingly, face rents have shown much stability over the past four years while the incentive levels have been reducing which has improved the effective rental position. Currently, Prime Gross Face rents average $341/sqm yet within a broad range with incentives in the 20–25% range. Secondary rents however have averaged $250/sqm with incentives also down within the 15% to 18% range. Looking ahead, the improved vacancy position and reductions in incentives will likely keep effective rents growing, however until these levels reduce to around 10% it is unlikely any face growth will be recorded.
Gold Coast continues to record improvement in occupancy levels with total vacancy falling for the seventh consecutive period to 15.0%. The best performer being Varsity Lakes/ Robina which has reduced vacancy back to 2008 levels now 9.8%, however the despite the small size of the market, most consistent performer has been Broadbeach reducing vacancies to 8.8%
Research
Know_How
Research
Office Locations
Vanessa Rader
Commercial Burleigh
Head of Research
T (02) 9249 3724 M 0432 652 115 E [email protected]
Level 1, 2 Classic Way “Treetops Square” Burleigh Waters Qld 4220 T (07) 5535 0500
Commercial Coolangatta/ Tweed Heads
Commercial Broadbeach
Shop G08, “Showcase on the Beach” Griffith Street Coolangatta Qld 4225 T (07) 5599 5000
Level 2, “Oasis Shopping Centre” Victoria Avenue Broadbeach Qld 4218 T (07) 5553 1100
Commercial Gold Coast
Commercial Southport
Commercial Robina
Level 4, “Promenade Building” 18–20 Orchid Avenue Surfers Paradise Qld 4217 T (07) 5555 8600
Level 1 89 Scarborough Street Southport Qld 4215 T (07) 5552 6388
29, 86 Robina Town Centre Drive Robina Qld 4226 T (07) 5593 2088
raywhitecommercial.com
Between the Lines Gold Coast Strata Office August 2014
The Gold Coast Strata Office market, much like the broader Gold Coast markets has been through a prolonged period of volatility. Market activity and values where reasonably strong pre GFC however responded adversely in 2008 and beyond due to the high levels of supply which were anticipated to enter the market.
Strata Office Volume of Sales
There is a reasonably high volume of strata office property spread across the Gold Coast region, major office locations include Southport, Surfers/ Broadbeach, Bundall and the most recent office precinct to the area Varsity Lakes/Robina. Over the
$90
80
$80
70
$70
60
$60
50
$50
40
$40
30
$30
20
$20
10
$10
-
Millions
No. S ales
Value and Number 90
$2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* B undall
S urfers/B roadbeach
S outhport
R obina/Varsity
B urleigh/C oolangatta
Volume of S ales (R HS )
Source: Cityscope, PIMS, Ray White (*to June 2014)
Strata Capital Values $6,000.00 $5,000.00 $4,000.00 $3,000.00 $2,000.00 $1,000.00 $2007
2008
2009 2010 2011 2012 S urfers/B roadbeach R obina/Varsity Total G old C oast
Source: Cityscope, PIMS, Ray White (*to June 2014)
past ten years, the highest volume of sales has come from development in this new location together with new assets within Southport. Southport has been recipient to the greatest volume of new stock in the period immediately prior to the GFC, which had an immediate negative impact on this market. With a large volume of new or under construction stock, high settlement risk, finance issues and high vacancies; this resulted in capital values needing to reduce quickly to absorb stock. After repricing and completion of stock there was some increase in investment which is notable in the 2010 period where close to 90 transactions were completed with over $40 million turning over, Southport represented 67 of these sales mostly by opportunistic investors looking to capitalise on the massive market falls.
This high supply situation has had the most devastating effect on capital values for the Southport market. Current average values have shown some rebound
By Precinct ($/sqm)
2004 2005 2006 B undall S outhport B urleigh/C oolangatta
During this time of economic uncertainty, Gold Coast as an office location was one of the worst hit markets resulting in rapidly rising vacancy levels peaking at 22.7% in the second half of 2010 which had a negative impact on both the rental and investment market.
2013 2014*
to $2,550/sqm after dipping to the low of $2,280/sqm in 2012; this 55.2% less than the high achieved pre GFC which averaged $5,685/sqm. The Varsity Lakes/Robina market also resulted in an immediate fall in values post GFC falling from $5,280/sqm in 2008 to $4,440/sqm the following year, a stable value was achievable for this region the following years before falling more recently to the current rate of $3,300/sqm, 37.4% down from its peak. Markets with limited transactional activity such as Bundall and Burleigh/Coolangatta have shown a more stable result in average capital values, albeit showing some negative affects to the economic slowdown of the 2008–2011period. Bundall currently averages a value of $2,500/sqm with Burleigh/Coolangatta averaging $3,540/ sqm albeit these averages are based on a small sample and transactions in the sub $500,000 price range.
Office Vacancy
The vacancy position of the Gold Coast has been steadily improving over the past few years after the total market result peaked at 23.3% in July 2010 falling to its current low of 15.0% in July 2014. Some
Gold Coast markets 35% 30% 25% 20% 15% 10% 5% 0% B undall
S urfers Paradise J ul-12
S outhport
J ul-13
Varsity Lakes/ R obina J an-14
B roadbeach Total G old C oast J ul-14
Source: Property Council of Australia
Gross Face Rents Suites sub 500sqm ($/sqm) 500 450 400 350 300 250 200 150 100 50
J un-02 Dec-02 J un-03 Dec-03 J un-04 Dec-04 J un-05 Dec-05 J un-06 Dec-06 J un-07 Dec-07 J un-08 Dec-08 J un-09 Dec-09 J un-10 Dec-10 J un-11 Dec-11 J un-12 Dec-12 J un-13 Dec-13 J un-14
0
Prime
S econdary
Source: PIMS, Ray White
The Gold Coast office market has started to turn a corner, improvements in investment into the city has started to translate into improved confidence and activity in the city. With the tram project now completed and the spotlight moving to Gold Coast as the next Commonwealth Games host, there is improved sentiment. With no major supply projects expected to enter the market beside the usual refurbishment projects which are offset by small withdrawals, this will help speed up the recovery. Encouragingly reducing vacancies and incentives are having a positive uplift on effective rents, which will also improve the attractiveness of investment. Strata office capital values are still well behind historic highs, couple this with the current low interest rate environment may also see owner occupier investment back into this market improving values and volumes.
markets have fared better than others, with the best performer being Varsity Lakes/Robina which has seen a dramatic drop in vacancies from 28.7% during January 2010 to its current low of 9.8%; this is due to the aggressive rental rates on offer for prime, near new accommodation. The smaller markets of Surfers Paradise, Broadbeach and Bundall have had more varying results pending quality, size and location of stock. Southport has been a steady performer, however this period witnessed an uptick in results to 14.2% which is still well below the 22.3% recorded in July 2010. Encouragingly, the performance of the total Gold Coast market is sound given the continual decline in overall vacancy; B grade assets have attracted the best results due to more realistic expectations around face rents.
The Gold Coast rental market has reacted as expected to the halt to demand post GFC. Face rents immediately saw a large decline of over 30% for some markets with the average prime market falling as much as 16.5% over an 18 month period. Couple this reduction in face rents together with a swift increase in incentives over 30% for some assets, the overall effective rental position saw fell around 50% in the secondary market while the prime market didn’t fare much better resulting in a 40%+ reduction over this short period. Encouragingly, face rents have shown much stability over the past four years while the incentive levels have been reducing which has improved the effective rental position. Currently, Prime Gross Face rents average $341/sqm yet within a broad range with incentives in the 20–25% range. Secondary rents however have averaged $250/sqm with incentives also down within the 15% to 18% range. Looking ahead, the improved vacancy position and reductions in incentives will likely keep effective rents growing, however until these levels reduce to around 10% it is unlikely any face growth will be recorded.
Gold Coast continues to record improvement in occupancy levels with total vacancy falling for the seventh consecutive period to 15.0%. The best performer being Varsity Lakes/ Robina which has reduced vacancy back to 2008 levels now 9.8%, however the despite the small size of the market, most consistent performer has been Broadbeach reducing vacancies to 8.8%
Research
Know_How
Research
Office Locations
Vanessa Rader
Commercial Burleigh
Head of Research
T (02) 9249 3724 M 0432 652 115 E [email protected]
Level 1, 2 Classic Way “Treetops Square” Burleigh Waters Qld 4220 T (07) 5535 0500
Commercial Coolangatta/ Tweed Heads
Commercial Broadbeach
Shop G08, “Showcase on the Beach” Griffith Street Coolangatta Qld 4225 T (07) 5599 5000
Level 2, “Oasis Shopping Centre” Victoria Avenue Broadbeach Qld 4218 T (07) 5553 1100
Commercial Gold Coast
Commercial Southport
Commercial Robina
Level 4, “Promenade Building” 18–20 Orchid Avenue Surfers Paradise Qld 4217 T (07) 5555 8600
Level 1 89 Scarborough Street Southport Qld 4215 T (07) 5552 6388
29, 86 Robina Town Centre Drive Robina Qld 4226 T (07) 5593 2088
raywhitecommercial.com
