Queensland’s Sunshine Coast has emerged as Australia’s hottest office market, with vacancies plunging because of record demand in a region that is fast becoming more than just a holiday destination.
Research from real estate agency Ray White reveals that the Sunshine Coast’s office market, which has more than doubled in size to 199,000 square metres since 2008, showed the highest rate of demand for its size of any Australian office market.
Vanessa Rader, head of research at Ray White Commercial, said it was part of a broader trend that had emerged during the pandemic in which the smaller, coastal office markets in the east out-performed their big-city peers.
The Gold Coast, Newcastle, Hobart and Wollongong office markets all recorded positive net absorption of 3 per cent or above.
“While these markets traditionally have been plagued by older-style stock, new developments have attracted a growing pool of potential occupiers, resulting in A-grade vacancies falling and demand to invest growing,” Ms Rader said.
“Over this same period, we have also seen new business starts in Queensland grow ahead of any other state, suggesting [that] new ventures borne out of COVID-19 employment changes have occurred.
“We’re seeing these small businesses now outgrow their home start-up and, as a result, there has been an increase in enquiry for office stock in the sub-250 square metre size range.”
‘There’s not enough stock’
Ms Rader said the Sunshine Coast, with its high number of offices in Maroochydore, had led the way with net absorption of 8.6 per cent in the year to January.
Sunshine Coast office vacancy rates had plunged from 22 per cent in January 2019 to 7 per cent this year, she said.
Other agents say vacancy rates have tightened further over the past two months.
“At the end of the day, there’s not enough stock being delivered,” said Brendan Robins of CBRE.
“The catalyst is strong business growth – local businesses that are growing so hard, shuffling around and taking extra space.
“As the new buildings come online, we’re seeing a flight to quality, with the tenants wanting to locate into higher-grade buildings.
“It does leave a vacuum with the C- and D-grade buildings, but that space is being absorbed by start-up businesses or companies that don’t need the higher-end product.”
Mr Robins estimated the vacancy rate in the Maroochydore CBD at the end of last year was just under 4 per cent and had since fallen to less than 2 per cent.
“We have an unhealthy office market at the moment because there’s basically no office space, meaning there’s no opportunity for business to grow,” he said.
Supply was a big issue, he said. Although there was some new space opening later this year, it had all been pre-committed. There would be nothing fresh until the end of next year, when the Walker Corporation development at 50 First Avenue was due to complete.
The 14-level tower will feature 9000sq m of office space and is a key element of the Maroochydore City Centre that Walker Corporation is developing with Sunshine Coast Council.
“We are master-planning a modern city with residential, retail and the best commercial office space to rival the big cities of Sydney, Brisbane and Melbourne,” said executive chairman Lang Walker.
“Post COVID, all around the country, we are seeing a big swing towards people working closer to where they live especially on the Sunshine Coast, and with the projections for growth up there being enormous over the next 20 years."
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