Gold Coast office vacancy rate increases for first time in more than 10 years

LATEST Gold Coast office figures contain an unexpected turn for the market, which has seen a steadily declining vacancy rate since 2010.

The office vacancy rate grew to 12 per cent in the six months to July.

THE Gold Coast is expected to power through an unexpected blip in its office vacancy rate, with expert commentators tipping the city to continue its downward trajectory towards cracking the 10 per cent mark.

The Property Council says the Glitter Strip vacancy rate blew out from 10.6 per cent to 12 per cent for the first six months of the year, mainly due to 6000/sq m of space coming on to the market in Robina and subdued activity during the Commonwealth Games.

Tania Moore, who chairs the Gold Coast’s Property Council committee, said the first increase in the vacancy rate in more than eight years was driven by Foxtel reconfiguring its Gold Coast operations and the release of the second stage of Lakehouse Corporate Space in Robina.

She said activity had risen in the second quarter of this year, which would help drive the vacancy rate down in the next reporting period.

The vacancy rate in Southport increased from 13.2 per cent to 14.4 per cent.

“The first half of 2018 was impacted by the Commonwealth Games, which saw limited activity during the first quarter of this year. However, this quickly turned around in the second quarter, resulting in a high level of transactional activity in May and June,” Ms Moore said.

She said a number of these deals, including one for 1300sq m in Bundall at the Corporate Centre, were still being finalised and would be completed over the next two quarters.

“A number of these transactions, however, are not showing in the current reporting period due to space not being physically occupied due to fit-outs still being completed,” she said.

“There still remains a good level of deals flowing into the third quarter, with activity primarily driven by existing Gold Coast businesses expanding.”

Tania Moore, who is chair of the Property Council’s Gold Coast committee, expects the vacancy rate to drop in the second half. Picture: Mike Batterham

Property Council of Australia Queensland executive director Chris Mountford said he believed the spike in the vacancy rate was temporary.

“With minor supply additions coming online in the second half of 2018 and no new space due to come online from 2019, the Coast will have the opportunity to work through the remaining vacant stock over the coming year,” he said.

“Currently, there are a number of tenant deals in the works. These deals are expected to be captured within the next report and will restore vacancy trends to the healthy levels we have witnessed over the last two years.”

CBRE’s Nick Selbie said if it wasn’t for the large release of space in Robina, the market would have entered its 10th consecutive year of net absorption.

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“The A-grade market continues to be the strongest-performing category, with rental growth of 5 to 10 per cent,” he said. “Specifically, GDI’s 50 Cavill Ave, in Surfers Paradise, has reached 98 per cent occupancy, increasing from 40 per cent in 2016.”

He said a number of commercial developments were in the planning stages, due to developers looking to capitalise on rising tenant demand.

“It is expected that much of this development will be concentrated in the northern Gold Coast corridor due to accessibility and public transport factors, population growth in this region, and availability of development land at feasible prices to support development,” Mr Selbie said.

A breakdown of vacancy rates shows three suburbs recorded decreases, including Broadbeach (down to 4.4 per cent), Bundall (down to 9.4 per cent) and Surfers Paradise (down to 11.3 per cent). The vacancy rate in Robina-Varsity Lakes grew to 13.3 per cent.

The B-grade and D-grade market segments were the best-performing, with the former’s vacancy rate dropping to 10.4 per cent from 10.9 per cent, and the latter’s from 11.7 per cent to 10.4 per cent.