Office space at a premium
MAJOR corporations relocating or upgrading to modern office space on the Gold Coast may need to scale back their “wish lists” with demand far outpacing supply.
Knight Frank’s office market overview for March has found effective rental growth of 5.9 per cent year-on-year for prime office space, despite the vacancy rate stubbornly remaining above the 10 per cent mark at 11.6 per cent in the most recent Property Council of Australia report.
It comes as the number of workers on the Gold Coast continues to grow, with the workforce 24 per cent greater compared to five years ago.
Knight Frank Gold Coast partner Tania Moore said while the Gold Coast market had historically been dominated by local businesses, there was a growing number of large corporations with head offices or branches on the Gold Coast.
“There are a number of requirements an office asset must satisfy to be attractive to all tenant types,” she said.
“Local businesses are driven by both the convenience of the location for business owners and customers with an overlaying cost sensitivity, while larger corporates bring the re- quirements of public transport, green ratings, staff amenity and retention and efficiency of floorplate to the table when choosing a location.”
Ms Moore said just 37,500sq m of supply had been added to the Gold Coast market in the past 10 years, equivalent to nine per cent growth for the overall market.
“There is a relatively small pool of modern assets which can handle the higher employee densities required for major corporate branch offices, processing centres and call centres,” she said.
“This concentrates demand into these relatively few assets and can require tenants to compromise on location or efficiency.
“This disconnect between the wish lists of tenants and the available stock on the ground is likely to only widen in the coming years with limited supply anticipated.”
New supply due to come to the market includes Alceon’s plans to build 15,000sq m of net lettable area across three office buildings at Robina.
The investment group is due to start work on the first building this month.
Knight Frank researcher Jennelle Wilson said new supply stalled last year with just 2744sqm of refurbished space returned to the market.
“Supply is expected to remain small, sporadic and precommitment driven in the medium term,” she said.
Ms Wilson said it was a different picture when it came to rental growth and demand.
Net absorption rebounded in the second half of 2018 to 2986sq m after falling during the first half of the year.
She said tenant inquiry rates indicated a stronger result for the first half of this year.
Ms Moore said it is anticipated vacancy levels will fall further during this year, with the rate fluctuating over 2020-21 as new supply comes online.
“While there are levels of precommitment to these projects, most are from existing tenants in the market that are relocating to consolidate their business operations,” she said.