Were you following the commercial property market on the Gold Coast last year? If so, you might have noticed that it was a strong year for sales volume, but that Q4 was a particularly slow three months. The total value of sold commercial property during the last three months of the year was just over $73million, which was a significant drop from the previous quarter's high of $272million.
The sales volume was high in Q4, but the average value of a singular deal was down to $1.179million. Industrial was the strongest performer as well, making up 40 per cent of all transactions. Retail was in second with 20.7 per cent, followed by child care and medical with 13.47 per cent of the Q4 2016 commercial sales.
How does 2016 compare with the record-breaking 2015?
The third quarter was the main driver for the high volume of sales on the Gold Coast, as the other nine months of the year were subdued in comparison to 2015.
It was always going to be difficult for 2016 to top the 2015 total for commercial property sales ($1.25billion). However, the Gold Coast made up around half of the 2015 total amount alone, with $632million over 2016. The third quarter was the main driver for the high volume of sales on the Gold Coast, as the other nine months of the year were subdued in comparison to 2015.
In 2015, there was a high volume of hotel transactions - these high value purchases were unlikely to be replicated for a second year, especially because most of the buyers of these hotels were from overseas. The strength of the 2015 commercial market lifted the initial price point of the 2016 market as well, which would have led to a decline in interest from all potential buyers.
That being said, affordable finance options have opened up the commercial property landscape for many private investors. Investment yields have remained low, which is prompting current commercial owners to hold onto their assets, and means the pool of interested parties keeps growing. When owners start looking to sell, it could be a very competitive market.
What areas performed strongly through 2016?
As much as Q4 was a slow performer compared to the high of Q3, 2016 overall was a great year for commercial property sales on the Gold Coast. Particularly for hotels and retail, high sales volume would have pleased investors. The proportion of sales in each industry for 2016 is as follows:
- Hotels: 30.75 per cent.
- Retail: 25.09 per cent.
- Commercial: 17.95 per cent.
- Industrial: 17.58 per cent.
- Development: 6.66 per cent.
- Child care and Medical: 1.98 per cent.
While child care and medical was the smallest part of the commercial sales make-up through last year, the second-largest commercial property sale of Q4 came in this area. A property in Biggera Waters sold in November for $7.25million. The largest property sale in Q4 was in the industrial sector - a Broadbeach Waters commercial development sold for $10.1million, also in November.
The largest property sale in Q4 was in the industrial sector - a Broadbeach Waters commercial development sold for $10.1million
This isn't surprising considering industrial property sales made up 40 per cent of the Q4 total. However, there were no other industrial sales over $2million, showing the high volume of sales that made up the $73million. Child care and medical was helped to a proportion of 13.47 per cent of the commercial sales in Q4 thanks to the previously mentioned property in Biggera Waters, and a $2.6million plot in Southport, sold in October.
How was commercial property expected to perform for buyers?
Looking at two properties in particular - one in Bundall and one in Surfers Paradise - the potential investment yield was high.
Lot 2/22 Crombie Avenue, Bundall
This retail lot of 610 square metres was in high demand with 93 enquiries during the four weeks it was on the market. The marketing budget for the lot was high, at $14,983.
The expected sale price of the retail plot was $2.2million, and had an approximate net yield of 6.6 per cent.
The expected sale price of the retail plot was $2.2million, and had an approximate net yield of 6.6 per cent. Gross rent per year (assuming 6.6 per cent net yield) is therefore $192,150. For prospective buyers, that sort of lease performance was too good to pass up.
The property was also surrounded by retail giants Forty Winks and JB Hi-Fi.
Lot 404/18 Cypress Avenue, Surfers Paradise
This smaller lot of 118 square metres had a similar marketing timeframe as above (four weeks) and a much smaller budget ($2,817). However, there was still high interest in the property, with 26 enquiries and a total of five registered bidders. The sales price was approximately $1.095million, and had a net yield of 7.27 per cent. Assuming that figure turns out to be correct, the net rent per year would be $79,568.80 - a sound return on a smaller retail investment.
As can be seen from the above performance of commercial real estate on the Gold Coast through Q4 2016, there was high demand and a lot of interest in the retail sector. Of course, the hotel sector is more expensive and harder for low-value, first-time buyers to get into easily. However, retail and industrial offer great avenues to start building a commercial property portfolio in the south-east of Queensland.
