Thursday 1 February 2024
Gold Coast office vacancy third lowest in Australia
Vacancy rates for the undersupplied Gold Coast office market have remained steady over the last six months, however, overall office supply is likely to remain constrained for the foreseeable future.
The vacancy rate on the Gold Coast changed from 6.3 per cent in July 2023 to 6.4 per cent in January 2024, with the upper grades of office space experiencing strong demand, according to the latest Property Council Office Market Report.
Queensland Executive Director of the Property Council Jen Williams said available office space on the Gold Coast was in short supply.
“Office vacancy across the Gold Coast market remains extremely tight, with it being the third lowest in the country behind only Hobart and the Sunshine Coast,” Ms Williams said.
“It is likely that this will remain the case for the foreseeable future with project feasibilities for new office buildings remaining extremely challenging due to significant cost escalation pressures.
“The latest results also highlight the ever consistent “flight to quality’ with vacancy in the “A Grade” segment of the market decreasing from 4.6 per cent to 3.3 per cent over the last six months.
“The reality is that with vacancy levels at 3.3 per cent for A Grade stock, it will be very difficult for new businesses to find prime office space on the Gold Coast.
“The Gold Coast office market has experienced remarkable demand over the last decade with vacancy steadily dropping from over 20 per cent in 2013.
“With this demand unlikely to abate over the next decade it will be essential to identify new planning and policy levers to ensure more office buildings can be delivered to support the Gold Coast’s growth,” Ms Williams said.
CBRE Senior Director Tania Moore explained that 2024 could be a challenging year for prospective tenants with limited options to find new space.
“We anticipate 2024 will continue to be challenging for occupiers with limited quality options available and after over 10 years of relatively flat rental growth, landlords can expect sustained rental growth for the foreseeable future which in turn will support new office development,” Ms Moore said.
“The majority of activity in 2023 was driven by existing businesses shuffling between buildings rather than new major tenants entering the market which is softening net absorption.
“Most of the enquiry that we are seeing continues to be driven by smaller occupiers with a focus on move-in ready suites.
“Unfitted suites are being overlooked due to the escalation in office fitout costs.
“Market conditions will prove challenging for larger scale new business entering the Gold Coast as well as sitting tenant relocations for those over 500sqm.
“Persistent low vacancy resulted in continued effective rental growth through the last half of 2023 with A and B grade face rents increasing on average by over 10 per cent.
“We anticipate this may continue in 2024 with no new supply additions for the foreseeable future.
“While there are a number of development application approvals in place it is unlikely any new project will commence until such times as gross rents have reached in excess of $700/sqm and developers have confidence around construction delivery and securing larger occupier pre-commitments to de-risk new developments,” Ms Moore said.
Media contact: Bryn Moffatt l 043217 666 13 | [email protected]