January 2015 – Gold Coast Wrap

23 January, 2015 / Vanessa Rader and Steven King

Gold Coast has witnessed somewhat of a revival in terms of demand across all commercial asset classes during 2014. A combination of low interest rates, an uptick in local market sentiment together with foreign investor interest has resulted in highs in transaction volumes and compression of investment yields.

In the lead up to the 2018 Commonwealth Games, Gold Coast has benefitted from increased infrastructure investment; major projects include the games venue locations, light rail, Southport’s identification as a Priority Development Area and Lend Lease’s $1.76 billion investment into the Gold Coast University Hospital. Couple this with other private sector investment into the region including AMP’s $670 million upgrade of Pacific Fair and QIC’s upgrade of Robina Town Centre highlights the long term confidence in the region by institutional investors. This investment into the region has not gone unnoticed to international investors with a distinct increase in enquiry and purchase by Asian investors.

Favourable business sentiment and consumer confidence has resulted in the broader office market improving; vacancy levels have declined, incentives have also compressed resulting in some increase in the effective rental position. An improved tourism market has benefitted the prime retail market pushing down yields, particularly on those assets which have a strong lease covenant. While, the appetite for residential development sites have also grown in 2014 with both Chinese investors and local developer activity up on previous years.

Other commercial asset classes including secondary retail and showroom assets have also yielded some positive results, from both the local and overseas investors. However the disparity in values have become more evident in the market during 2014; those properties which ticked all the boxes proved to be in high demand, with purchasers seemingly paying a premium, whereas assets which had vacancies or downward reversionary risk, purchasers were seeking discounts to off-set these unknowns.

Looking ahead, the projected reduction in interest rates will further fuel investment activity by domestic private investors, SMSF and small syndicates while foreign investors will continue to seek out prime grade investments. However the push for secondary properties will continue with sellers now in a unique position to divest properties that have been otherwise difficult to sell in years gone by. The low Australian dollar is anticipated to continue, the positive result on the local tourism market translating into an increase in domestic travel activity and demand for accommodation.

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