- Rising building costs have driven up the values of second-hand buildings in Mackay.
- A tourism uptick has seen long-standing vacant shops on the Gold Coast now leased.
- Covid population growth continues to buoy regional markets.
A multitude of factors are driving demand and costs across the Queensland commercial real estate market.
The regional markets, in particular, are witnessing ‘dynamic shifts’, with Raine & Horne Commercial general manager, Chris Nicholl observing:
“These changes are driven by a combination of factors such as demographic shifts, economic dynamics, including an upsurge in tourism, and global market forces that are reshaping commercial property market trends and investment dynamics in many regional growth hubs in Queensland.”
Vacant Gold Coast shops finally leased
The return of tourism to the Gold Coast has borne fruit for the local retail sector.
Raine & Horne Commercial’s Gold Coast director, Michael Parisi, observed that many long-standing vacant shops are now leasing, following renewed retail interest.
According to the recently released H2 2023 Raine & Horne Commercial Insights Report, retail vacancies are now below 5%, and yields are between 5% and 6%.
“The Gold Coast’s industrial market also remains strong, particularly in the smaller strata-owned developments, which are experiencing high demand for sales and leasing,” said Parisi.
“Older-style industrial showrooms are undergoing façade facelifts to align with current style trends and enhance marketability, resulting in higher annual rents.”
He added that interest rate hikes have not yet affected sales yields.
The Townsville retail sector, however, has gone the other way, with the company’s local sales and leasing executive, Peter McCann, noting many retailers are looking to close or significantly downsize. The fall in retail activity follows a tightening of household purse strings and interest rate increases.
Covid population growth continues to buoy regional markets
Demand for industrial property remains high as approximately 47,000 individuals have migrated to the Sunshine Coast since the onset of the COVID-19 pandemic, and as a result, there are significant variations in sales prices, observed Raine & Commercial Sunshine Coast director of sale and leasing, David Smith.
“Smaller industrial units in a Kunda Park complex sold off the plan or settled in mid to late 2022 for around $3,100 psm. However, recent units in this complex sold for $4,000 to $6,000 psm,” said Smith.
Significant regional interest has also come from Melbourne, according to the company’s Hervey Bay director, Graham Cockerill.
“Changes to retail leasing legislation in Victoria late last year have also encouraged more investors to divest Melbourne assets and buy commercial property investments in our region,” said Cockerill.
According to the report, Hervey Bay retail yields are between 7.5% and 8%, vacancies are around 5%, rents are between $250 to $300 psm, and rates are around $2,500 psm.
High building costs drive interest in second-hand buildings
Mackay is seeing a rise in second-hand stock values due to the soaring cost of construction, observed Raine & Horne Commercial Mackay general manager Des Besanko.
“At the current costs, owners of new sheds need to be leasing their properties at a significant premium to what businesses have historically been prepared to pay. Current construction costs make it very hard for developers to bring new stock out of the ground,” said Basanko.
He noted that the gap between a new building and second-hand commercial property assets was relatively narrow.
“However, at present, the expenses associated with construction and inflation are elevating the worth of pre-owned buildings. Consequently, refurbishing the property is a simpler task, and it becomes immediately available for use.”
The report noted industrial rents are between $165 to $185 psm, with yields between 7.5% and 8%.
Six month market outlook for Mackay
Source: Raine & Horne.