OFFICE VACANCIES "HEADED FOR SINGLE DIGITS" BY 2016
Written on the 24 October 2014 by Nick Nichols
THE Gold Coast office market, at one time labelled the worst in Australia, could be headed for single-digit vacancies as early as early as 2016, according to Knight Frank.
Tanya Moore, the co-managing director of the commercial agency, says an annual take-up rate of 10,000sqm a year has brought total vacancies down to about 69,000sqm – or about 15 per cent.
The vacancy compares to 16.7 per cent earlier this year and around 20 per cent nearly two years ago.
Moore, who along with commercial property veteran Mark Witheriff took the helm of Knight Frank Gold Coast in June, says the current absorption rate would lead to single-digit vacancy rates by late 2016 or early 2017.
“This will be a catalyst for construction of more office buildings,” she says.
Moore says the potential for new developments is being buoyed by strong anecdotal evidence that banks are “looking at the 421 postcode more favourably” than they have in the past five years.
“Banks appear to be re-engaging and looking at ways of putting deals together, whereas up until nine months ago they were still very cautious,” she says.
According to new council data, more office stock is coming to the market with about 41,000sqm of office space earmarked for Southport since the area was declared a Priority Development Area late last year.
The new office developments, along with 5000 apartments, comprise $2 billion worth of projects lodged with the council for approval in Southport alone over the past year.
The surge in activity has landed sweetly for Moore and Witheriff who have more than doubled staff numbers at Knight Frank Gold Coast since moving from their long-time positions at CBRE in June.
The corporate office has grown staff numbers from 10 to 23 in that time, with Knight Frank luring a number of high-profile names to the team – including land development specialist James Branch who comes on board at the end of this year.
“We’re stepping it up in terms of size and breadth of the business,” says Witheriff who has been responsible for some of the biggest commercial deals on the Gold Coast in recent years.
Knight Frank has had a strong presence in retail and management, but Witheriff and Moore hit the ground running with a number of landmark appointments, including the sales campaign for Sheraton Mirage and the leasing campaign for the Corporate Centre complex.
Knight Frank has also added Marina Mirage, Ballina Fair shopping centre and Niecon Plaza to its property management portfolio, which also includes The Oracle.
Witheriff says Knight Frank is stepping up its focus on commercial management, including smaller retail centres.
“While we are focusing on high-end retail, we also see opportunity in an area that has been underserviced is neighbourhood shopping centre management and leasing,” he says.
“We have someone specifically focusing on that sector of the market. It is a bread and butter business that supports our management team.”
Witheriff says Knight Frank Gold Coast, which has had a presence on the tourism strip for 30 years, has benefited from an upswing in commercial activity across the board.
“We’ve seen confidence come back, and part of that is due to the light rail being completed,” he says. “The city is fluid again, people are moving up and down the city and spending money.”
Witheriff says while there is a weight of money coming from China, it is also coming from more traditional markets in Singapore, Malaysia and Indonesia.
“I’ve been up there three times since joining Knight Frank and everyone is talking about outbound investment, and south-east Queensland, Sydney and Melbourne are the real focus points.”
Witheriff says he has “given up” predicting cycles, but he sees solid growth on the Gold Coast up to 2018 and even for a couple of years after.
“What the Gold Coast does well is in this time of the market,” he says.
“The Gold Coast is a value proposition compared to Sydney and Melbourne. It is out of synch with the rest of the eastern seaboard.
“While we’ve given up predicting cycles, we’ve got a target of 2018 when most of the infrastructure (for the Commonwealth Games) will be delivered, and that would seem to be the top of the market. I suspect the cycle will probably go past that to 2019-20, which will make it a six-year period.
“This upswing is very different because it’s infrastructure based. The downside is that it has a limited lifespan, although the fundamentals are much stronger, particularly with tourism up.”
Witheriff says there is “no question that people are underestimating what is happening” on the Gold Coast. But he says the property crash is still fresh on their minds.
Meanwhile, Witheriff says there has been strong interest in the Sheraton Mirage with potential buyers being shortlisted for the property. He declines to give further details.
Indian owner Pearls Australasia could possibly more than double its investment in the beachfront resort which it bought in 2009 for $62.5 million. Pearls is understood to have spent more than $30 million on refurbishments but some market sources have cited a price as high as $170 million could be achieved.
Author: Nick Nichols