The surprising flaw in our buoyant property market

Strong fundamentals have Sunshine Coast property market in fine shape but there's one sector where over-supply appears a problem

THE Peregian Springs Coles Supermarket sold for $41 million this year.

A SERIES of positive factors were continuing to drive an upbeat Sunshine Coast property market however the 2017 CBRE Property Review found commercial yields remained relatively low.

The Sunshine Coast Airport upgrade, a $925 million spend on the Bruce Highway at Palmview, development of SunCentral in Maroochydore and Oceanside at Birtinya along with increased population and tourism growth were boosting business confidence the report found.

The development market was still performing strongly on the back of demand for well-priced and well located product with the report finding commercial land in established precincts generally priced from $700 to $1200 per sqm.

Premium residential development sites close to water or with substantial development upside can command $1500 to $4000 per sqm.

Demand from developers for both town house and medium-high density unit sites remained high, with sites selling for $50,000 to $100,000 a lot, depending on development costs.

CBRE expects development to remain strong in 2018 as business continued to expand within the region.

Against those positives commercial property yields on investment moderated during 2017 averaging across the range from 6.75 per cent to 7.5 per cent while those with a national tenant and a 5-10 year lease were selling for a yield of around 5-6 per cent.

"Although the influx of capital into major projects will continue, many investors are now sitting on the fence due to years of yield compression," the report states.

"Nevertheless, the fundamentals of strong population growth and significant projects in the pipeline will keep the sun shining on our commercial market."

The report found the industrial sector had emerged as the star performer of all commercial property sectors, with increased sales for vacant land and newly-built stock.

The Caloundra South and Palmview subdivisions and strong residential property activity were fuelling strong growth for construction-related businesses.

Centra-Park-Coolum and the Sunshine Coast Industrial Park (Caloundra South) achieved a number of land sales and new projects were started and some completed during the year.

Selling prices for new strata units range from $1700 up to $2000 per sqm for modern new tilt sheds.

Industrial rents increased over the year, ranging from $110 - $130 per sqm for quality stock and from $100 - $110 per sqm for secondary stock.

The report found demand for industrial land continued to strengthen with the average 2000 sqm allotment virtually sold out in Coolum.

Industrial land was from $200 per sqm at Bells Creek and Coolum while established precincts like central Kunda Park and Caloundra West achieved around $300-$330 per sqm.

The report also highlighted that despite talk of gloom with the challenges from online shopping and the entrance of Amazon into the Australian market that the retail sector was continuing to improve.

It said spending was up across most categories, strongest in food retail and the bulky goods.

The food and beverage market was the star performer across the country.　

The $400m expansion of Sunshine Plaza, due for completion in late 2018, continues the investment in retail renewal with other projects including The Point at Kawana were completed in 2017.

Highlights among shopping centres sold during 2017 included the Peregian Springs Coles for $41m and the Tewantin Woolworths for $17.3m.

The report predicts challenging times ahead for the Sunshine Coast office market covering Kawana, Maroochydore and Mooloolaba with available space now totalling more that 170,000 square metres.

Rental vacancy rates were expected to increase for 2018 and beyond following the completion of Kon Tiki (16,000sq m) and stage one of Youi's new complex at Sippy Downs.

Commercial office rents were generally in the range of $300 to $360 per sqm plus outgoings, the level they have been for the past decade.

Capital values for A-grade stock ranges from $4000 to $4600 a sqm.　　

Originally published as The surprising flaw in our buoyant property market