Private investors continue to drive the demand for office buildings on the Gold Coast, making up about 80 per cent of the sales September year to date, according to new research by Colliers International.

The research shows the volume of settled sales for properties above $5 million has reached circa $73 million in the first nine months of the year, sitting above the 2018 total volume of sales of $66 million.

The Robina-Varsity lakes precinct recorded the most activity, representing 75 per cent of the total volume of sales this year or $53 million.

At a glance: 

• Yields for A grade assets fluctuate in the range of 7 to 8 per cent, underpinning a solid value proposition for investors on the Gold Coast
• Settled sales for properties above $5 million reach circa $73 million to September, above 2018 total volume of sales of $66 million
• The Robina-Varsity precinct represented 75 per cent of the total volume of sales this year or $53 million

Steven King, Director in Charge Colliers International Gold Coast said that while there had been a small increase in investment activity compared to last year, investment opportunities above $5 million remained tightly held.

“Interestingly office development site transactions acquired by unlisted funds and private syndicates have reached circa $14.2 million over the year to date, which represents nearly 20 per cent of the volume of sales,” King said.

“The Gold Coast investment market continues to operate as a value/yield driven market, with the average yield spread widening over the past 18 months and sitting in the approximate range of 50 to 150bp when compared to the Brisbane CBD and Metro markets.

“Yields for A grade assets fluctuate in the range of 7 to 8 per cent, underpinning a solid value proposition for investors on the Gold Coast.

“The most notable settled sale was the transaction of the A grade building located at Lake Orr Drive in Varsity Lakes for $25.4 million which was acquired by Argus Property Fund syndicate at an initial yield of 7.41 per cent.”

Renee Hughes, Manager of Office Leasing at Colliers International said Surfers Paradise has been the most improved leasing market on the Gold Coast over the medium term. 

She said the vacancy rate in Surfers Paradise tightened from circa 30 per cent in July 2015 to 10.5 per cent in July this year following a cumulative net absorption of circa 13,500 square metres equivalent to 19 per cent of the precinct’s stock.

“We anticipate that the A grade market in Surfers Paradise will continue to attract moderate demand from tenants, supported by steady to tighter vacant space, and development activity restricted to refurbishment projects,” Hughes said.

“Looking at the market overall, tenant demand has been subdued over the first half of 2019 as some public and private sector tenants have implemented a workforce downsizing strategy in the attempt to reduce costs. 

“State Government has reduced office occupancy at the Robina-Varsity Lakes precinct over the past six months, partially explaining the market negative net absorption of 6,850 square metres which sits well below the historical average net absorption for the past 3,5,10 and 20 years.

“The average incentives have increased from 12 per cent in March 2019 to 15.3 per cent in September 2019, sitting at historical average levels. We anticipate incentives will hold firmly at historical averages or continue to trend upwards until the vacancy falls to single digit levels.”

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