Good office space tight
THE market for A-grade office space on the Gold Coast is expected to tighten further in 2018, leading to a severe shortage at the back end of the year.
Last year saw a surge in the take-up of A-grade space, mostly in the first half, as properties such as 50 Cavill Ave in Surfers Paradise saw a shift towards prime office space.
Property Council Gold Coast committee chair Tania Moore, who is joint managing director of Knight Frank Gold Coast, said she expected the “drift to quality” to continue this year with strong activity in the first two weeks.
For the 12 months to July last year, approximately 10,000sq m of A-grade stock was absorbed, leading to close to 14,000sq m left vacant.
“If the figures for the 12 months to July this year are similar, that would leave just 4000sq m left,” she said. “It is pretty tight. If you are a larger tenant it is going to be difficult to get spaces of 500sq m or above.”
Ms Moore said that may lead to development of Agrade space, but not on the central Gold Coast where land was too costly.
The only A-grade office tower on the drawing board is The Base at Robina, however, like all of these projects, that is subject to precommitment from tenants, before the project moves ahead.
“It is unlikely you’ll see any new A-grade stock in Southport, Bundall, or Broadbeach,. The land costs are so high that it is not feasible with the current rental rates,” she said. “Any new building is likely to be built along the M1 corridor at Helensvale or Coomera because the land is cheaper but the market is going to continue to have to tighten, to push rents up, to get to the point where new buildings are justified.”
Ms Moore said landlords were starting to draw back on offering incentives to new tenants, which happened before rents increased.
Cushman & Wakefield associate director Ed Howard said the overall office vacancy rate has dropped below 10 per cent and he believed it would stay there for the year.
“That is from our analysis. I think it will tighten up across all sectors, some pockets more than others, off the back of general business confidence,” he said. Mr Howard said a 900sq m space at the Oasis Shopping Centre was under offer and there were plenty of developers looking for space.
But Ms Moore said she believed the Property Council’s figures for the six months to January, due to be released next month, would not show a big dent in vacancy rates.