SMEs to cushion Gold Coast office market from COVID19 downturn

The Gold Coast office vacancy rate is higher than six months ago but sky-high office vacancy figures seen during the Global Financial Crisis are unlikely to be repeated.

THE sky-high office vacancy figures seen on the Gold Coast during the Global Financial Crisis are unlikely to be repeated during the COVID19 downturn, industry experts say.

The Property Council today released its latest Office Market Report for the Gold Coast showing vacancy levels increased slightly from 12.8 to 13 per cent for the six months to July.

The worst-affected precinct was Robina-Varsity Lakes, which recorded a vacancy rate of two points higher at 15 per cent due to Foxtel vacating its space in the Foxtel tower and moving to Southport.

Although the report captures more than three months of the COVID19 pandemic, it is unlikely to capture the full impact due to the influence of the Code of Conduct for commercial tenancies.

Vacancy rates soared in Surfers Paradise

The mandatory code, which is set to expire next month, stipulates a number of principles for negotiations between tenants and landlords including that landlords must not terminate leases for non-payment of rent during the pandemic and tenants must stay committed to their lease terms.

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The code applies to all tenants suffering hardship as a result of coronavirus and with an annual turnover of up to $50 million, meaning it applies largely to the SME sector.

During the GFC the office vacancy rate spiked on the Gold Coast to one of the worst rates in the country.

For the second half of 2012 the overall vacancy rate was 20.3 per cent with Surfers Paradise recording the worst rate at 28.4 per cent.

However, CBRE Gold Coast senior director of office leasing Tania Moore said the dark days of the GFC were unlikely to be repeated.

Ms Moore said that was because in the lead-up to the downturn 110,000sq m of ‘speculative’ new supply was added to the market, which fuelled increases in the vacancy rate.

“This is not a factor in the current market,” she said.

“The Gold Coast office sector is also supported by one third of its total supply being strata-titled and home to owner-occupiers.”

CBRE Gold Coast senior director of office leasing Tania Moore Picture: Luke Marsden

Ms Moore said the Coast’s strong SME sector provided a cushion for the market.

She said small businesses were able to be more nimble than corporations when adapting to the challenges of coronavirus on their operations. Most had already made the decision to return to the office.

“SME businesses are not accountable to a corporate entity so they have been able to come back to the office (from working from home) a lot quicker and they have been able to adapt more,” she said.

Ms Moore said while it was difficult to predict where the vacancy rate would head in January, inquiry rates from the SME sector were strong, particularly in the sub-200sq m range.

“The Gold Coast’s SME business operators are nimble and dynamic in their approach and their choice of a Gold Coast base is typically lifestyle driven,” she said.

“We anticipate the value proposition around lifestyle and wellbeing factors will play a critical role in future decision making for office requirements as enforced lockdowns eventually ease around the country.”

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