OFFICE SPACE WOES WORST IN 15 YEARS
Written on the 4 February 2010
THE Gold Coast’s office market is in serious trouble after hitting a 15-year high with vacancy rates soaring to 22 per cent.
Projects like Corporate Tower Two at Bundall and the Rocket at Robina are proving a hard sell. The Rocket (11,280sq m) and The Corporate Centre Stage 2 (7,648 sq m) were the largest contributors to supply in 2009.
According to a report by CBRE, Gold Coast office stock has increased by almost 140,000 sq m or by 43 per cent in the last five years. Around 60 per cent of this is in new supply. The Oracle will add a further 8,000 sq m, while the new Titans HQ at Robina will contribute 3000 sq m – 1800 sq m of which will be absorbed by the club.
Tania Moore, senior director of office services CB Richard Ellis (CBRE), told goldcoastbusinessnews.com.au that owners of office blocks are offering incentives of up to 25-30 per cent off the total value of the lease by way of fit-outs.
“It’s becoming extremely difficult and owners are doing what’s necessary to attract tenants,” says Moore.
“We get traction with leasing and then new product is released onto the market. Last year was difficult, but this year will be better.”
The last time the Gold Coast had 20 plus per cent vacancy rates was in 1994 and it took six years to correct. Moore says a healthy rate is around 8 per cent. Stock that is B and C grade is starting to shift after heavy discounting.
Director in charge of Gold Coast Colliers Stewart Gilchrist, says it’s a tenant driven market.
“There’s not a large tenant demand, more so small business demand, not larger whole floors,” he says.
“Anybody with large space availability is looking for Council, TAFE colleges and medicos. Supply is there but it can be cooked very quickly on the Gold Coast, because it’s not a very big market.
“On the other hand it’s a great time for tenants to turn around and say we are relocating. Anyone with a lease expiry date over the next 12-18 months, go for it. It’s a great time to look at you your options. Tenants are in control in terms of doing great deals out there.”
The CBRE market view shows that Southport is the largest precinct, with total stock at 153,100 sq m. Additions over the past five years have seen this total rise by 54,400 sq m net, or by 55 per cent. Robina and Varsity Lakes has grown in recent years to become the second largest precinct, with a stock figure of 131,900 sq m.
A net increase of 72,600 sq m, or 122 per cent, has been recorded over the past five years. Together, these two precincts have accounted for around 90 per cent of the total Gold Coast stock increase over this time.
Robina and Varsity Lakes (4525 sq m) and Southport (3804 sq m) were the strongest precincts in terms of net take-up, with Robina/Varsity Lakes well in deficit compared with supply additions.
The small Broadbeach precinct also recorded a positive take-up figure (1082 sq m). Bundall (- 4499 sq m) and Surfers Paradise (-2,082 sq m) were both negative. In both precincts, three of the past four years have witnessed negative net absorption.
Gilchrist does however identify growth in the commercial retail space due to land shortage close to the city.
“We have investors out there now prepared to make decisions and our guys are coming back into the office a lot more positive. We are seeing a lot of southern money coming into the Coast,” he says.