STRATA OFFICES COMING BACK INTO VOGUE

24 September 2014

The Gold Coast’s strata titled office market, which represents approximately 31 percent of all office space in the city, is coming back into favour with demand increasing especially from owner occupiers, according to commercial property specialists, Knight Frank.

Knight Frank’s Joint Managing Director, Tania Moore said the Gold Coast’s status as the small business capital of Australia had driven demand for strata title space over the years as many business owners opted to buy their operating premises rather than lease.

“Our 31 percent of strata title offices is much higher than Brisbane with four percent, Sydney CBD around 10 percent and Melbourne CBD around six percent,” she said.

She said approximately 145,100 square metres of space on the Gold Coast was strata titled space and this comprised approximately 970 individual units.

“The average unit size is 149 square metres, but approximately 77 percent of the individual units are this size or smaller,” she said.

“With SMSF’s able to borrow for property there is a marked increase in the enquiry we are seeing from business operators who can see the investment sense in owning their own premises as opposed to leasing.”

“There is no issue for them in terms of the quality of the tenant and security as they are the lessee.”

Ms Moore said Knight Frank had experienced an increase in enquiry levels and there was very little new strata title space coming onto the market.

Knight Frank said the largest amount of strata stock was located in the Robina/Varsity Lakes area with a total of 54,400 square metres – 29,900 square metres in Robina and 24,500 square metres in Varsity.

Southport has 45,500 square metres, Surfers Paradise 22,300 square metres and Bundall 21,800 square metres.

“Stock ranges from older , pre-1990, secondary grade buildings, particularly in Bundall and Surfers Paradise, to recently completed grade-A high rise buildings such as Southport Central and The Rocket in Robina,” she said.

“Of the current stock, 64 percent, or almost 94,000 square metres was added between 2005 and 2009. No new stock entered the market between 2010 and 2013.

“This profile is skewed by the emergence in that time of Robina/Varsity Lakes as a commercial precinct, with a focus on strata title product, and the development of Southport Central.”

Knight Frank said since 2000 approximately $500 million worth of strata titled office property had changed hands on the Gold Coast.

Sales in 2010 tallied a little under $50 million, boosted by more than $25 million worth of sales at Southport Central, mainly in tower three, many of which did not settle until 2011.

Knight Frank said the total office vacancy rate on the Gold Coast overall had fallen from 19.9 percent to 15 percent as of August this year.

“The blended secondary space vacancy rate is also on a steady downward trend and is currently sitting at approximately 13.4 percent,” said Ms Moore.

“Robina/ Varsity Lakes has seen sustained improvement in vacancy rates which are now 9.8 percent compared to 17.2 percent a year ago.

“While pricing levels have remained stable owner-occupiers are continuing to drive sales and as vacancy levels continue to ease we anticipate growth in capital value on the back of rental increases.”

Knight Frank refurbishment programs were underway at several secondary grade buildings which would ultimately see new opportunities for SMSF’s, private investors and owner occupiers.

Ms Moore said pre-GFC sale rates for new strata office space ranged from the $5000 to $6000 per square metre in buildings like Southport Central Tower and The Rocket and secondary stock was selling between $2000 to $4000 per square metre, subsequently falling to as low as $1600 to $4000 per square metre depending on building quality and location.