Sun shines on Coast property market
THE Sunshine Coast commercial property market had a mixed year in 2017. Yields are still relatively low, given the interest rate cycle and strong demand from investors. However, during the latter part of the year, activity was low to moderate across both sales and leasing transactions.
CBRE's end-of-year review of the commercial property market identifies the Sunshine Coast property market is still being fuelled by key factors including: Significant infrastructure investment; Airport upgrade; Bruce Highway upgrade at Palmview; Major property projects: SunCentral Maroochydore, Oceanside; Increased tourism numbers; Strong population growth; Rising business confidence.
CBRE Sunshine Coast director Brendan Robins said yields (return on investment) moderated in 2017, with an average yield range of 6.75%-7.5%.
"At the sharp end of the yield curve, investment properties with a national tenant and a 5-10 year lease are selling for around 5%-6%. However, assets with a distressed lease profile are still selling above 8%.
"The industrial sector is probably the star performer of all the sectors, with increased sales for vacant land and newly-built stock. Construction-related businesses have seen strong growth as a result of demand within the residential property market.''
Centra Park Coolum and the Sunshine Coast Industrial Park (Caloundra South) achieved a number of land sales and new projects were started and some completed during the year, Mr Robins said.
"Selling prices for new strata units range from $1700 up to $2000 per sqm for modern new tilt sheds.
"Industrial rents have increased over the year, ranging from $110-$130 per sqm for quality stock and from $100-$110 per sqm for secondary stock.''
Mr Robins said demand for industrial land has continued to strengthen - with the average 2000 sqm allotment virtually sold out in Coolum and priced from $200 per sqm at Bells Creek and Coolum where there are only a few small lots remaining. Established precincts such as central Kunda Park and Caloundra West achieved circa $300-$330 per sqm.
"Despite a barrage of challenges such as online shopping and Amazon's entrance into the Australian market, the retail sector has continued to improve. Spending was up across most categories, strongest in food retail and the bulky goods.
"The food and beverage market is the star performer across the country. Development on the coast included the $400m expansion of Sunshine Plaza, which is due for completion in late 2018. Some projects were completed in 2017, including The Point at Kawana.''
Several shopping centres were sold in 2017 including the Peregian Springs Coles ($41m) and the Tewantin Woolworths ($17.3m).
The Sunshine Coast office market (Kawana, Maroochydore and Mooloolaba), which now now totals over 170,000sq m of space, will face some challenges over the coming years.
CBRE has found that due to significant developments such as Kon Tiki (16,000 sqm) in Maroochydore and Stage 1 of Youi at Sippy Downs, the vacancy level will increase for 2018 and beyond.
"Rents are generally in the range of $300-$360 per sqm plus outgoings and have been at this level for around a decade. Capital values for A-grade stock range from $4000-$4600 per sqm.
"The development market is still performing strongly on the back of demand for well-priced and well located product. Commercial land in established precincts is generally priced from $700-$1200 per sqm.
"Premium residential development sites close to water or with substantial development upside have transacted for $1500-$4000 per sqm. Demand from developers for both townhouse and medium-high density unit sites is high, with sites selling for $50,000-$100,000 per lot, depending on development costs.
"We expect development to remain strong in 2018 as business continues to expand within the region. Although the influx of capital into major projects will continue, many investors are now sitting on the fence due to years of yield compression. Nevertheless, the fundamentals of strong population growth and significant projects in the pipeline will keep the sun shining on our commercial market.''