Exciting times on horizon

Positive outlook for region with major projects set to continue driving the economy

CHANGING LANDSCAPE: Cranes dot the skyline for the $400million expansion of the Sunshine Plaza shopping centre at Maroochydore. Picture: Erle Levey

THE Sunshine Coast is growing up. No longer the little child, it has blossomed into its teenage years and getting close to adult status.

Sunshine Coast commercial and industrial real estate agents Scott Gardiner and Jason O'Meara of Savills are predicting continued buoyancy in the commercial property market for the region this year.

On the back of a strong 2017 exciting times are forecast to continue, Savills Sunshine Coast manager Scott Gardiner said.

"We still see the continued demand for commercial investment property due to the low interest rates.

"People see commercial property as a safe investment bet, being bricks and mortar, together with better returns than money in the bank or the up and down unpredictable share market.''

Work is well under way on the Sunshine Plaza shopping centre expansion at Maroochydore. Picture: Erle Levey

At the mid to back end of 2017 Savills saw a slight shift in the mindset of buyers on accepted yields/returns where they were preferring to seek for commercial property more around the 7.5% to 8% mark (on average).

Jason O'Meara noticed a shift in yield expectations of between 50-75 basis points depending on the grade of the asset.

"Due to the buoyant investment market over the past 12-18 months we are still seeing sellers with expectations on average of around 7% or sub 7%.

"In such a transitional market we find that sellers will only be putting their property on to the market to sell at a premium while the buyers that are left in the current market who are active are far more educated than in previous years and are being very particular and happy to wait and find the right property that best suits them and ticks all the boxes for their needs.''

Savills see the Sunshine Coast commercial property market to continue at a steady pace due to healthy business confidence and continued strong population growth within the region.

This comes off the back of ongoing infrastructure development around the Kawana hospital and SunCentral precincts all getting out of the ground and progression of Stockland's Aura development at the southern end of the coast, Mr O'Meara said. Especially when this is coupled with the Sunshine Coast Airport expansion, Bruce Highway upgrade, Sunshine Plaza expansion and mooted fast rail project.

"There has definitely been a steadying of the ship," he said. "The scramble for property is not as strong as witnessed in 2016 and the earlier part of 2017 and less 'stressed assets' have hit the market.

"A majority of commercial owners do not need to sell and are sitting pretty with increasing returns within their existing property portfolios and sitting on properties that are creating far superior returns than what they can achieve in other investment areas ... only people really wanting to sell are ones that are reaching an older age or retirement phase and/or are wanting to cash in and achieve a premium at the top of the market.

"Perhaps we are at 11pm on the invest clock right at the moment and it could well be that the commercial market has peaked.

"Off the back of the residential construction boom we have seen an increase in tradies and construction-based companies and workers utilising their superannuation to buy into industrial sheds for their own businesses and personal needs.

"At the other end of the spectrum we have seen the middle to upper-end residential builders trying their hand at developing/building industrial shed complexes and selling down these strata titled industrial sheds.

"It is predicted that development generally will remain healthy in 2018 and there is still demand for well-located unit/townhouse sites, together with more traditional low density residential sub-division and mobile home estate sites.

"Additionally, within the industrial sector we have seen an increased volume of owner occupied businesses expanding into larger facilities through the Caloundra State Government estate and Coolum estate. These businesses are expanding out of industrial precincts such as Kawana, Caloundra and Kunda Park.''

Due to this activity Savills are starting to see the availability of industrial land dry up in the central part of the Coast and there is now a shortage of supply and ready to go industrial land, shovel ready to build now.

Scott Gardiner said there was the planned industrial estates such as Aura, that is being sold off the plan now, Chevallum industrial estate under construction and another 20-lot subdivision at Coolum with development works starting shortly. Otherwise there is very little land, if any, available for sale in Kunda Park and or Kawana.

"The office market has seen some challenging times in recent years with little leasing take up and we are predicting similar trends in this space for the next 12 months,'' he said.

"The Sunshine Coast office market has seen the addition of new office buildings in 2017 with Kon-Tiki, 50 Wises Road in Maroochydore and Youi's new first stage building at Sippy Downs completed.

"Of the approximate 170,000sq m of office space monitored on the Coast this has added another 32,000sq m to the market place, supply for many years to come.''

Savills understand the office vacancy rate to be around 11-12% across the Coast at the end 2017, this is an upward shift of about 5% as at the end of 2016.

Retail investment within the A-grade retail sector has been strong through 2017 and Savills see this still being the case for higher quality well located investments leased to national tenants.

"This is where we are still seeing the yields in the mid 6% to 7% range for premium investment stock," Mr Gardiner said.

"We have seen an increase in development and building within this retail sector and see the trend of this still continuing through most of 2018, off the back of Stockland's new Birtinya town centre and retail shopping centre at Aura, and the arrival of David Jones at Sunshine Plaza.

"Some significant retail investments sales occurred in 2017 including Savills sale of Caloundra Village Shopping Centre for circa $19m. Rents have also increased through the most prime locations for retail space.

"Overall, the year ahead is looking positive with great projects driving the economy and Savills are optimistic for another sunny year on the Sunshine Coast for the commercial property market.''

Work is well under way on the Aerodrome Rd entrance to the new Maroochydore CBD. Picture: Erle Levey