Sunshine Coast Office Market Overview | Ray White Commercial Northern Corridor Group

Commercial Research

BETWEEN THE LINES Sunshine Coast Office Market Overview February 2022

Total stock 198,994sqm Net absorption 17,068sqm Total vacancy 7.0%

Vacancy by quality grade

2021 withdrawals 0sqm 2021 completions 5,518sqm Future supply pipeline 2,380sqm

A Grade

8.0%

B Grade

6.3%

C Grade

6.9%

D Grade

0.0%

70.4% of vacant stock on the market is in the sub 199sqm size range, while less than 10% of all current listings are over 500sqm.

Source: Property Council of Australia, Ray White Commercial

SUNSHINE COAST OFFICE INDICATORS Net Absorption (sqm) 20,000

15,000

10,000

5,000

Jan-22

Jan-21

Jan-20

Jan-19

Jan-18

Jan-17

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

-5,000

Jan-10

0

Source: Property Council of Australia

Prior to COVID-19 the Sunshine Coast was on a positive trajectory of growth with strong gains in population, new business starts and employment which resulted in an increase in demand for commercial and residential accommodation.

Despite lockdowns and border closures, Sunshine Coast weathered the COVID-19 storm well with current (December 2021) unemployment at just 4.5%. High office demand has been recorded over the past two years, this take up has come across all grades. A grade most notably with new, quality offerings attracting new and growing businesses as well as Brisbane and interstate operations looking for satellite options so staff could work close to home as more of the population enjoy the lifestyle benefits of the region. A further 4,544sqm was absorbed in B grade stock while C and D grade assets enjoyed remarkable enquiry and take up reducing their vacancy rates to 6.9% and 0.0% respectively.

Compared to other Australian non-CBD markets; Sunshine Coast is number one in terms of total net absorption, showing greater demand than Parramatta, Newcastle and Brisbane Fringe, a significant result given it is the third smallest office market recorded by the Property Council of Australia.

SUNSHINE COAST OFFICE INDICATORS Net Supply (sqm) v Total Vacancy (%)

NET SUPPLY (SQM)

Jan-22

Currently total vacancy sits at 7.0% which represents 13,914sqm of vacant stock with a 0% sublease factor.

Jan-21

-5.0

-5,000

Jan-20

0.0 Jan-19

0 Jan-18

5.0

Jan-17

5,000

Jan-16

10.0

Jan-15

10,000

Jan-14

15.0

Jan-13

15,000

Jan-12

20.0

Jan-11

20,000

The last three years we have seen significant improvements to the fundamentals of the Sunshine Coast office market. After a high supply period in 2018 which resulted in vacancies climbing to 21.9%, three consecutive years of high absorption has seen vacancies tumble while new supply projects continue to be added. Over the past 12 months we have seen the completion of A grade office stock in Vitality Village (4,700sqm) as well as Atria, Sippy Downs (818sqm), however with full or substantial pre-commitment these had no adverse impact to the overall office market. Take up of 10,828sqm was recorded for A grade stock resulting in vacancies of just 8.0% after peaking at 33.9% just three years ago.

Jan-10

25.0

Jan-09

25,000

TOTAL VACANCY (RHS)

Source: Property Council of Australia

Ray White Commercial’s analysis on the current vacancies in the marketplace, identifies a high volume of smaller stock available across the region with 42% of active listings in the sub 100sqm size range, while less than 10% of all listings are over 500sqm.

SUNSHINE COAST NET FACE RENTS

By Precinct ($/sqm)

During COVID-19 Sunshine Coast saw a reduction in employment no different to all regions of Australia. Estimates from NIEIR show this was just 2.9% down which is outstanding given the high level of employment in the food and accommodation sectors in this region. Encouragingly there was stability or improvement in employment in health, education and public administration sectors which has been instrumental in this uptick in office demand across all quality grades. With Sunshine Coast benefitting from the continued growth in population due to high interstate migration into Queensland and recovery in the tourism sectors given border re-openings, demand for quality office stock is not expected to dissipate which is likely to have a positive impact on face rents in the short to medium term.

$500 $450 $400 $350 $300 $250 $200 $150 $100 $50 0 CENTRAL

NORTH

SOUTH

Source: Ray White Commercial

Over the last six months we have recorded 79% of all enquiries being for smaller stock in the sub 100sqm size range, capitalising on the growth in new and emerging businesses. Currently net face rents can vary substantially based on quality, location and size however the Central region ranges between $200/sqm and $440/sqm net representative of the delivery of new A grade office supply. North which extends up to Noosa Heads averages $160-$400/sqm while the Southern precincts which include flexible mixed industry zoning such as Aura business park skews the average rates down. Regardless the South offers great affordability in the $110/sqm to $300/sqm range and connections to Brisbane has resulted in it being most sought-after location according to recent enquiry numbers.

The Sunshine Coast has been in growth mode the last few years, COVID-19 has tempered this improvement recently, but it is anticipated to continue over the next few years. With the world’s spotlight on Brisbane for the 2032 Olympic Games in which Sunshine Coast will showcase, together with the huge investment into infrastructure in the region including the rapid rail connection with Brisbane, not to mention the anticipated population gains; the future is bright for the Sunshine Coast. With limited new stock projected to enter the office market, vacancies are expected to continue to compress pressuring rents upwards.

RAY WHITE COMMERCIAL NORTHERN CORRIDOR GROUP

RESEARCH

Michael Shadforth Managing Director michael.shadforth@raywhite.com T: +61 7 5430 3777 M: +61 488 981 076

Vanessa Rader Head of Research vrader@raywhite.com T: +61 2 9262 3700 M: +61 432 652 115

Emily Pendleton Associate Director Senior Sales & Leasing Executive emily.pendleton@raywhite.com T: 1300 25 50 75 M: +61 402 435 446

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