Riding on the back of a hectic 2021, commercial property in the region can expect to continue its solid growth throughout this year.
The Sunshine Coast has one of the strongest office property markets in Australia, industrial property sales have been breaking records and commercial yields remain strong.
So, what can we expect to see across the commercial market this year? While no one has a crystal ball, there are some early trends emerging.
FINDING A NEW NORMAL FOR OFFICE WORK
Working from home has changed how we work forever, with many businesses now embracing hybrid or remote work models even as staff return to the office.
Studies show that up to 40% of employees prefer to work at least a few days a week from the office which is good news for owners and office markets that have been affected by the pandemic.
But no one really knows what the new normal will look like for offices. Some businesses are preferring high-quality space in smaller villages while others are taking this opportunity to relocate to larger, more modern premises.
Paul Butler, Principal of Ray White Commercial Noosa & Sunshine Coast North says that demand for quality office stock is soaring across the region.
“We cannot keep up with demand for A-grade stock. Businesses want quality, location and staff amenities. They’ll often seek out a smaller space in a lifestyle location, like Peregian Beach or Noosaville, to give employees better working conditions, car parking and good air quality rather than taking an older building in a busier area.”
“Owners of B and C-grade classes will have to focus on upgrades or renovations to add value in order to attract good quality tenants.”
A SUBTLE SHIFT IN MARKET SENTIMENT
While there are plenty of reasons for optimism, the commercial sector is nearing or at the top of the market. This has brought with it a subtle shift in sentiment which means properties may begin taking a little longer to move.
“Prior to Christmas, purchasers were moving swiftly which meant looking at the property particulars but not necessarily in-depth at the tenancies themselves,” says Paul Butler. “Now, more questions are being asked about tenant viability and tenure of lease so owners planning to sell need to be more prepared.”
“Our experienced commercial property consultants work with vendors to prepare a suite of relevant information on your property to give you the best chance of success,” said Paul.
INDUSTRIAL RENTS TO RISE
With industrial property on the coast continuing to set records almost every time a new transaction is completed, we can expect to see an increase in industrial rents this year.
Industrial rental rates, which were sitting in a range of around $110 to $120 per square metre net are now achieving in the range of $140 to $180 per square metre. Some of the smaller sized new industrial units have broken into the $200+ per square metre bracket.
The region has literally run out of industrial land and there are no substantial new developments in the pipeline. Competition from investors and owner-occupiers means some people will miss out and be forced to rent. Rents will have to rise due to high demand and lack of stock.
GENERATIONAL BUSINESS CHANGEOVER
After two years of COVID-19 and soaring commercial property prices, some local business owners are choosing now to make a lifestyle change.
Ray White Commercial Noosa & Sunshine Coast North Principal Paul Forrest says the prospect of high returns has changed the thinking of some business owners on the cusp of retirement.
“We are seeing a few businesses with freeholds attached selling up. People are aware that property values may have doubled or tripled in the last four or five years. It’s a great time to make a lifestyle decision and sell while the market is high to fund a comfortable retirement,” Paul said.
“Investors can pick up a successful, long-term business with a loyal customer base and freehold property. In some cases, it’s more about the property than the business. There’s a generational changeover happening and we are going to see a lot of that in the next 12 months.”
Some tightly held enclaves in the Noosa Shire, including Noosa Junction and Hastings Street, are going to market for the first time in 20 plus years.
DIGITAL SECTOR ONE TO WATCH
According to Forbes, the digital real estate sector will continue its strong growth throughout 2022, fuelled by online conferencing, e-commerce and entertainment.
The Sunshine Coast now has the fastest internet connection from the east coast of Australia to Asia with the Sunshine Coast International Broadband Network project going live in 2020.
But it’s not simply a case of build it and they will come. The pandemic has somewhat delayed the realisation of outcomes from this project which offers businesses the capacity for fast, reliable transfer of data across the world.
It’s early days but with a new data centre at Maroochydore and a strong push for bringing knowledge businesses to the region, we may begin seeing more tech-based businesses make the move to the Sunshine Coast, along with additional supporting infrastructure.
IT’S TIME TO REVIEW YOUR COMMERCIAL PORTFOLIO
The peak of the market is imminent. Interest rate hikes before the end of the year are now considered a certainty, with the Financial Review this month reporting that the Commonwealth Bank may increase its cash rate as early as June.
Now is the ideal time to weigh up your financial position and consider whether to make changes to your portfolio.
“Vendors need to be constantly assessing their position in relation to the properties in their portfolio and whether each asset is right for them moving forward,” says Paul Butler. “Now is a very good time to assess your requirements because the market is moving so quickly. It’s really important to have an agency with their finger on the pulse in terms of market movement, along with expertise in the local area and access to an extensive network of potential buyers.”
“Our message to vendors is that it’s a good time to sell. There are plenty of people wanting to buy,” says Paul Forrest. “It is important to prepare your property well and for everything to be in order if you want good numbers.”
For a chat about your commercial property or the current market, contact our office on +617 5474 7600 or firstname.lastname@example.org
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