Gold Coast commercial market hot

Demand for Gold Coast commercial property is expected to remain high in 2024, despite a lack of quality stock resulting in a decline in transactional activities.

The latest data from real estate firm Colliers reveals transactions across the retail, office and industrial sectors totalled $648 million, down some 39% on 2022 sales as of October 2023.

Colliers director Steven King (pictured above left) says that while there has been a drop in transactional activity, it’s largely due to a lack of high-quality stock being placed on the market, although demand is expected to continue throughout this year.

“If you looked at the data at face value and saw a 39% drop in transactional activity across the sector you would automatically assume we are in some kind of downturn,” King said.

“But the reality of the situation is that institutional and private investors are holding onto their assets because of the buoyant sentiment on the Gold Coast, driven by migration and infrastructure growth.

“This is resulting in a reduction in stock coming onto the market which has significantly reduced the number of transactions across the retail, industrial and office markets.”

King said there has been incredible interest in the Gold Coast property sector from private investors and institutional investors who want to gain a foothold on the Gold Coast but can’t.

Queensland broker Xavier Quenon (pictured above right), principal at Go Mortgage, said it’s evident that the Gold Coast is experiencing a significant surge in demand for commercial properties, and this is mirrored in the levels of construction activity happening across the region.

“This will result in ebbs and flows of undersupply and elevated demand, likely to lead to capital growth and strong rental demand,” Quenon said. “We experienced this on a personal front, having purchased our business premises in our SMSF only five years ago. The value of this has doubled due to the supply/demand market conditions.” 

Quenon said careful planning, sustainable development practices, and ongoing investment will play vital roles in addressing the demand-supply dynamics in the Gold Coast's commercial property market.

“Either way it looks to be promising times in the real estate market and the commercial space alike.”

Colliers’ latest Gold Coast Market overview revealed that industrial sales took the lead in 2023 with total transactions of $346 million, up from $285 million in 2022.

The industrial market accounted for more than half of the year’s total sales by value.

Last year retail property sales of $193 million were down from $675 million in 2022 and the tightly held office market, which has been buoyed throughout the year by record low vacancy rates, edged higher with sales of $120 million – up from $103 million.

Of the total 107 transactions recorded up until October 2023, just six were above $30 million, predominantly in the industrial sector with some 72 of the transactions below $5 million.

“These buyers are less susceptible to interest rate fluctuations and have been driving demand for smaller properties below the $5 million mark, leading to strong sales performance in that sector,” King said.

Property buyers exercising caution

Continued uncertainty in the macroeconomic environment has prompted potential buyers to exercise caution, resulting in yields softening by 75 to 100 basis points across all sectors from their peak levels.

“The softening of yields is not unexpected in a rising interest rate environment as property increasingly competes with other asset classes for investment capital,” King said.

“However, that doesn’t reflect the continued underlying demand for quality commercial and industrial assets on the Gold Coast.”

Office space is in high demand on the Gold Coast, with supply set to dry up in 2024 and 2025, according to Colliers.

While Colliers’ data indicated there had been an easing in the Gold Coast’s office vacancy rate over the six months to July, when it hit 6.3% (up from 6% earlier in the year), these conditions are not expected to last.

According to the PropTrack Overseas Search Report, searches for Australian properties from overseas property buyers increased 11.5%, with rent searches up 7.8% in the three months to October 2023 with the Gold Coast the second most searched location to buy in the country, and third most searched location to rent.

Why does the Gold Coast property market have so much appeal to buyers? Share your thoughts below.