The Gold Coast’s commercial market transactions have seen a huge dip this year, according to the latest Colliers data.
With a gross regional product (GRP) of about $41 billion in 2021/22, the Gold Coast’s economy is an important slice of Queensland’s economy, accounting for 10.6% of the State’s gross state product (GSP).
Although it is a city known for its strong fundamentals, the Gold Coast’s transactions involving retail, office, and industrial sectors have totalled $648 million, which is down 39% on sales recorded in 2022.
Why the drop?
Earlier this year, Colliers director of industrial, Daniel Coburn said the issue of industrial land shortage had become even more acute in 2023.
“That’s great news for investors already in the market as yields and capital values are on the rise, but it’s become much more challenging for the many businesses looking to establish a base on the Gold Coast.”
Colliers director, Steven King, pointed to the lower transactional activity as evidence of a lack of high quality stock being placed on the market.
“If you looked at the data at face value and saw a 39% drop in transactional activity across the sector, you would automatically assume we are in some kind of downturn,” said King.
“But the reality of the situation is that institutional and private investors are holding onto their assets because of the buoyant sentiment on the Gold Coast, driven by migration and infrastructure.
“This is resulting in a reduction in stock coming onto the market which has significantly reduced the number of transactions across the retail, industrial and office markets.”
King also agreed with Coburn’s point, insofar as private and institutional investors who want, but are struggling, to get a foothold in the Gold Coast’s market.
Tightened household budgets impacting retail sector
Colliers’ Gold Coast Market Report September 2023, which looked at trends impacting the Gold Coast’s commercial sector in the first half of 2023, noted that rising interest rates constrained disposable income and led to a decline in retail spending.
Report author, Pragya Sharma, noted “In the short term, retail trade will continue to be impacted as consumers adapt buying habits and embrace cost saving practices.
“Additionally, the retail market will be impacted by international visitor numbers, which have increased since border reopening but remain significantly lower than 2019 levels.”
Rate rises underpin diminished investor sentiment
Sharma noted that Queensland was one of the most active markets in Australia for retail transactions and investment activity in 2022.
However, 2023 was a different story.
“The sales volume for this year has been impacted by higher borrowing costs and a general weakening in investor sentiment.”
Pragya Sharma, Colliers
“Only $216.8 million worth of transactions have changed hands so far this year, marking a substantial 92% drop from the sales volume in 2022.
“However, there is an expectation that buyer sentiment will improve once market certainty is established, which is closely tied to the conclusion interest rate hikes.”
Assessing the industrial market
The industrial sector is certainly not immune to the vagaries of high building costs, labour shortages, and the conditions of the economy.
However, King noted that the industrial market accounted for more than 50% of 2023’s total sales by value.
Moreover, Colliers’ Gold Coast Market Overview revealed industrial sales totalled $346 million, an improvement on $285 million from last year.
Article source: thepropertytribune.com.au