Sustained population and employment growth on the Gold Coast will underpin the city’s continued maturation as a service centre and business hub, which will in turn strengthen both its office and residential rental markets, according to recent research from Knight Frank.
Tania Moore, Knight Frank partner and joint head of Gold Coast, said that tenant demand in the region was steadily improving following the first half of 2018 where business was interrupted by the Commonwealth Games.
“The second half of 2018 and into 2019 has seen stronger levels of tenant enquiry, and we forecast this will only get stronger as the city’s population continues to grow, along with employment growth, which is underscoring demand,” she said.
The Gold Coast Office Market Overview for March 2019 found that population growth in the region will average 2 per cent per annum over the 25 years from 2016 to 2041.
It also found that the majority of growth will come from both internal and overseas migration, due to lifestyle and educational opportunities.
“There are jobs to support the people moving in, with the Gold Coast unemployment rate at a low of 4.3 per cent as at the end of December 2018, well below the Queensland average of 6.1 per cent,” Ms Moore said.
“The number of workers on the Gold Coast grew by 24 per cent in the five years to November 2018, with the two fastest-growing white-collar sectors being finance and insurance and education and training.”
Ms Moore said that tenant demand in the Gold Coast’s office market had remained dominated by local businesses, but there was a growing core of larger corporates with branch or head offices located in the region.
“There are a number of requirements an office asset must satisfy to be attractive to all tenant types,” she said.
“Locally based businesses are driven by both locational convenience for business owners and customers with an overlaying cost sensitivity, while larger corporates bring the requirements of public transport, green ratings, staff amenity and retention and efficiency of floorplate to the table when choosing a location.
“With only 37,500sqm of supply added to the Gold Coast market over the past 10 years, equating to a 9 per cent growth in the stock base, 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.”
Ms Moore said that this concentrates demand into these relatively few assets, requiring some compromise by tenants.
“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.”
Traditionally, the Gold Coast investment market has been dominated by private investors and syndicators given the relatively smaller investment scale, but as confidence builds with a higher level of tenant demand and the depth of the market, the region is likely to appear on the radar for a greater swathe of investors, said Mark Witheriff, Knight Frank partner and joint head of Gold Coast.
“The relatively higher yields on offer will become more favourably considered as the buyer climate shifts from capital growth due to yield compression to become investment focused on income maximisation,” he said.
“Prime yields remain on a firming trend; however, the Gold Coast market never reached the levels of contraction seen in other major markets.
“The expectation is for some further improvement as prime rental growth accelerates in the medium term and a lack of investment opportunities sees more investors embracing a regional location.”