As per the latest research from Colliers International, the volume of settled sales for properties above $5 million has reached circa $73 million in the first nine months of the year, sitting above the 2018 total volume of sales of $66 million. The Robina-Varsity precinct represented 75 per cent of the total volume of sales this year or $53 million.
“Whilst we have seen a small increase in investment activity compared to last year, investment opportunities above $5 million remain tightly held,” said Steven King, Director-in-Charge Colliers International Gold Coast.
“Interestingly office development site transactions acquired by unlisted funds and private syndicates have reached circa $14.2 million over the year to date, which represents nearly 20 per cent of the volume of sales.
“Gold Coast investment market continues to operate as a value/yield driven market, with the average yield spread widening over the past 18 months and sitting in the approximate range of 50 to 150bp when compared to the Brisbane CBD and Metro markets. Yields for A grade assets fluctuate in the range of 7 to 8 per cent, underpinning a solid value proposition for investors on the Gold Coast.
“The most notable settled sale was the transaction of the A grade building located at Lake Orr Drive in Varsity Lakes for $25.4 million which was acquired by Argus Property Fund syndicate at an initial yield of 7.41 per cent.
“And a notable recent asset repositioning was the sale of 130 Bundall Road in Bundall for $11 million at a passing yield of 5.4% which sold to an owner occupier. The office building was partially refurbished by the previous owner who acquired the property in mid-2017 for $7.5 million,” said Mr King.
Renee Hughes, Manager of Office Leasing at Colliers International said Surfers Paradise has been the most improved leasing market on the Gold Coast over the medium term.
“The vacancy rate in Surfers Paradise tightened from circa 30 per cent in July 2015 to 10.5 per cent in July this year following a cumulative net absorption of circa 13,500sqm equivalent to 19 per cent of the precinct’s stock.
“We anticipate that the A grade market in Surfers Paradise will continue to attract moderate demand from tenants, supported by steady to tighter vacant space, and development activity restricted to refurbishment projects.
“Looking at the market overall, tenant demand has been subdued over the first half of 2019 as some public and private sector tenants have implemented a workforce downsizing strategy in the attempt to reduce costs.
“State Government has reduced office occupancy at the Robina-Varsity Lakes precinct over the past six months, partially explaining the market negative net absorption of 6,850 sqm (which sits well below the historical average net absorption for the past 3,5,10 and 20 years).
“Under current market conditions, we see significant opportunities for landlords and tenants to add value to the market and their businesses. Tenants can seek alternative accommodation to meet their current needs potentially accessing improved rental conditions in the way of incentives or rental abatements.
“The average incentives have increased from 12 per cent in March 2019 to 15.3 per cent in September 2019, sitting at historical average levels. We anticipate incentives will hold firmly at historical averages or continue to trend upwards until the vacancy falls to single digit levels.
“Landlords could reposition the assets to better meet the market needs. Refurbishment of any size could be used as a repositioning strategy to improve the income and performance of the building by redefining the tenant profile and maximising the floor plate,” Mrs Hughes said.