Why the Sunshine Coast office market is one of the strongest in Australia
As office vacancy rates shot up drastically in capital cities last year, a different story was unfolding on the Sunshine Coast.
A glut of buildings on the market was steadily absorbed, and new A-grade projects were quickly filling with tenants. As vacancy rates dropped from a high of 22 per cent in 2019 to just 13 per cent in January this year, according to figures from the Property Council, the Sunny Coast became the hottest office market in Queensland.
Herron Todd White’s Chris McKillop said the market had been steadily improving for a number of years. “It’s quite buoyant, and it’s been ticking along well,” he said. “And then the last 12 to 18 months has gone ballistic.”
In the property valuations firm’s latest report, the Sunshine Coast is designated as the country’s only office market approaching its peak. Notably, the areas considered “rising office markets” were in the regional areas of Byron Bay, Lismore and Ballina.
While the pandemic and remote working arrangements have thrown much of the nation’s office market into unchartered territory, in many areas demand for office space is far from subdued.
“You look around the Sunshine Coast and in some respects, it’s like COVID has never happened,” Mr McKillop said.
The expansion of the medical sector around the Sunshine Coast University Hospital was partly driving the uptake of office space, he said. “And the Sunny Coast has one of the highest levels of start-up businesses in the country. There’s a lot of incubators.”
The new Maroochydore City Centre is slated to deliver 160,000 square metres of commercial and retail space over the next 15 years, with Walker Corporation recently signing a $2.5 billion development agreement.
The success of Foundation Place, the first commercial project to open in the new city centre, has boosted confidence in the local office market.
The five-storey office building developed by Evans Long was fully leased within months of completion.
Transact Property Group director Mark Dann said he was now dealing with enquiries for A1, the developer’s next proposed retail and office project in the Maroochydore CBD.
“The enquiry has certainly been very strong and we attribute that to the success of Foundation Place,” Mr Dann said. “It’s given local businesses and the commercial market a lot more confidence.”
Foundation Place was bought by fund manager Primewest for a rumoured $30 million at the start of the year.
Mr Dann said the shift away from major eastern seaboard cities since the pandemic began had boosted the local office market.
“People moved up and said, ‘I can work from home’ … but after a certain period of working at home, it’s probably not ideal so they’ve gone out looking for space.”
Mr Dann said his agency was having difficulty finding small office spaces between 50 and 120 square metres for tenants. “And there’s honestly not a lot available. Two years ago, there would have been pages and pages of listings.”
He noted a “flight to quality” as new office projects with more facilities were coming onto the market or in the pipeline.
Despite the drop in vacancy, net rental levels have remained stable over the past two years.
“It’s still affordable. There’s A-Grade space for $450 per square metre,” Herron Todd White’s Chris McKillop said, adding that the spaces often included parking and a view.
He expected the new Maroochydore precinct to continue to attract businesses from across the Sunshine Coast.
“Our vacant space is all the older stock that was built 15 or 20 years ago, and is probably in mixed-use locations.”
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