Despite a small uptick in vacancies over the last six months, the Gold Coast, one of the country’s tightest office markets is set to face a major squeeze over the next three years.

According to Colliers Gold Coast Market Overview for the September quarter, a virtual standstill of new projects will see the tourist precinct’s office market supply dry up in 2024 and 2025.

Colliers warns against reading too much into the recent rise in vacancies, triggered by new supply coming to market, which saw the net absorption of office space rise 16% to 6,534sqm in the first half of 2023.

Overall, the city’s office vacancy rate edged higher (from 6%) to 6.3% in the six months to July.

But based on current remaining vacant space of 29,157sqm (out of the Gold Coast’s total stock of 462,373sqm), Colliers data suggests the take-up of space – currently running at more than 12,000sqm annually – points to a continued tightening over the next few years.

“Given the limited supply expected over this period and continued strong demand, the vacancy rate really has nowhere to go but down,” said Steven King, the Gold Coast director-in-charge at Colliers.

King attributes the Gold Coast market’s tightest [vacancy] position on record to high construction costs, labour shortages and higher borrowing costs, which he suspects spells no new projects over the next 24-plus months.

Adding to the supply squeeze was the additional 880 new GST-registered businesses in 2022, while professional services and healthcare grew by 703 and 557 new businesses respectively.

Robina and Broadbeach

Colliers data suggests Vicinity Robina will be the sole provider of new office space on the Gold Coast for the rest of 2023, with just 2,200sqm coming to market which represents a third of the net absorption rate over the first six months of this year.

The Robina-Varsity Lakes precinct had the biggest increase in supply with an additional 6,820sqm in the past six months.

This was matched by the precinct experiencing the city’s highest level of net absorption at 5,734sqm – which represents 88% of the total net absorption across the city’s key office precincts.

“The only other project of note is V & A Broadbeach, which is expected to deliver 5,500sqm in 2026 as many other proposed developments remain on hold for now,” said King.

Despite adding just 464sqm of new space, Southport’s net absorption surged to 1,793sqm, followed by Bundall with positive net absorption of 784sqm – making this the city’s tightest office market with a vacancy rate of 4.8%.

Due to emerging space constraints in the Gold Coast’s key office precincts, King has witnessed the advent of non-core precincts over the past three years. These delivered around 11,700sqm of new office space in the last year alone, of which 75% is now occupied.

A-grade demand

With the lowest vacancy of any office grade (at 4.6%), Colliers data reveals A-grade as the Gold Coast’s hottest office market, with net absorption of space in this grade being driven by the uptake of newly constructed buildings.

King cites recent sales as a sign of buyers’ willingness to pay top dollar for strategically located prime office space.

For example, a Centrelink office, located on Brisbane Road, with a substantial landholding of 4,365 square meters, sold for $6.6 million, underscoring the strong buyer interest.

What made this a highly sought-after asset, adds King, is its substantial net annual income of $484,038 (after factoring in company land tax) plus a substantial net lettable area of approximately 1,532sqm.

Sales to exceed decade average

Boosted by the Gold Coast City Council’s $46.25 million acquisition of the Wyndham Corporate Centre building at Bundall, total overall office property sales on the Gold Coast in the first six months of 2023 hit $118 million.

While this pushed the total higher than full-year sales for 2022, the figure remains below the $382 million recorded in 2021.

However, by Colliers’ estimates, sales are on track to exceed the 10-year average of around $130 million.