A lack of new office developments on the Gold Coast is likely to see the availability of office space dry up over the next three years.
According to Colliers Gold Coast Market Overview, despite the city’s office vacancy rate increasing from 6 per cent earlier this year to 6.3 per cent in July, it’s not a sign of an easing trend.
Net absorption of office space surged 16 per cent, to 6534sq m, in the first half of 2023, with the rise in vacancies triggered by new supply being added to the market.
However, with only 29,157sq m of vacant space currently remaining out of the Gold Coast’s total stock of 462,373sq m, the current take-up of 12,000sq m will mean supply will run out in three years.
Gold Coast Director-in-Charge at Colliers, Steven King said the office market is likely to get tighter.
“The Gold Coast remains one of the tightest office markets in the country, and despite a small uptick in vacancies in the last six months, the broader trend is for a continued tightening over the next few years,” Mr King said.
“Given the limited supply expected over this period and continued strong demand, the vacancy rate really has nowhere to go but down.”
Mr King said that only 2200sq m will come to market over the remainder of the year.
“Supply continues to be impacted by high construction costs, labour shortages and higher borrowing costs, and as a result we are not anticipating any new projects in 2024 and 2025, potentially leaving the Gold Coast market in its tightest position on record,” he said.
“The only other project of note is V & A Broadbeach, which is expected to deliver 5500sq m in 2026 as many other proposed developments remain on hold for now.”
The report found A-grade office buildings remain the hottest property in the Gold Coast office market, with the lowest vacancy of any office grade at 4.6 per cent.
Net absorption of space is highest in this grade, primarily driven by the uptake of newly constructed buildings.
Tightening vacancy rates and dwindling supply are also making a notable impact on office rents, with A-grade rents rising 6 per cent over the year to an average of $518 per square metre in June.
Secondary stock saw slightly higher overall growth of 8 per cent, reaching an average of $445 per square metre, driven by strong demand from the SME market.
Gold Coast office rents are up on a quarterly basis, with the June quarter experiencing the largest growth in the past 12 months, which Mr King said indicated a ‘heightened demand-supply mismatch’.
“Since there is no new unabsorbed supply entering the market, we’re expecting low vacancy rates to fuel further rental increases and lead to a further reduction in incentives by landlords,” he said.
“Tenants are also making decisions sooner than in recent years, owing to the tight market conditions.”
Overall, total office property sales on the Gold Coast in the first six months of 2023 hit $118 million, a figure boosted by the Gold Coast City Council’s $46.25 million acquisition of the Wyndham Corporate Centre building at Bundall, pushing the total higher than full-year sales for 2022.
However, the figure remains below the $382 million recorded in 2021, but is on track to be well above the 10-year average of about $130 million.