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Dynamic shifts emerge in regional Queensland's commercial property markets

August 16, 2023
  • H2 2023 Raine & Horne Commercial Insights[i] reveals the landscape is shifting for Queensland’s regional commercial property markets driven by demographic changes, economic factors, surging tourism, and global market forces.
  • The Gold Coast sees revived leasing due to a tourism surge, with vacant shops filling fast, while the industrial market is strong for sales and leasing, particularly in the smaller strata-owned developments.
  • Queensland's population growth due to COVID-19 migration has accelerated demand for commercial property in Sunshine Coast and Hervey Bay.
  • Townsville's industrial growth is tied to the Australian Army presence and the Australia-Singapore Military Training Initiative (ASMTI).

Leading commercial real estate group Raine & Horne Commercial has released its H2 2023 Commercial Insights Report, detailing how the commercial property market landscape in various Queensland regions are undergoing dynamic shifts[ii].

Mr Chris Nicholl, General Manager Raine & Horne Commercial said, “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.”

According to Mr Michael Parisi, Director of Raine & Horne Commercial Gold Coast, tourism is on the rise bringing a vibrancy to the leasing market in the Gold Coast region, with many long-standing vacant shops now leasing with renewed retail interest.

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. Older-style industrial showrooms are undergoing façade facelifts to align with current style trends and enhance marketability, resulting in higher annual rents. Mr Parisi says interest rate increases this year have yet to affect sales yields.

Population migration a factor in commercial property demand

Mr David C. Smith Director of Sale and Leasing at Raine & Horne Commercial Sunshine Coast says 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.

“Smaller industrial units in a Kunda Park complex sold off the plan or settled in mid to late 2022 for around $3,100psm. However, recent units in this complex sold for $4,000 to $6,000 psm,” Mr Smith said. 

Mr Graham Cockerill, Director of Raine & Horne Commercial Hervey Bay says the coastal city’s Bay’s markets is also reaping the benefits of the population growth sparked by the COVID-19 pandemic when people from NSW and Victoria shifted to the southern Queensland coastal town to escape lockdowns.

This population growth has contributed to more muscular conditions for local business services and has parlayed into commercial real estate leasing and buying activity.

“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,” Mr Cockerill said.

“We’ve seen enquiries from Victoria pick up substantially this year.”

Skyrocketing construction costs boost values in Mackay

In north Queensland, Mr Des Besanko, Managing Director of Raine & Horne Commercial Mackay, said the current global cost of building materials is proving advantageous for investors who own second-hand buildings in the Mackay region.

“Second hand stock is being dragged up in value because the cost of construction is getting so high that I feel we are going to underbuild. We especially need more industrial stock in Mackay.”

Hence, owners of pre-owned buildings, be it an industrial shed, small office building, or retail shop, are experiencing a period of great satisfaction, Mr Besanko noted. 

Further north, Mr Peter McCann Sales & Leasing Executive, Raine & Horne Commercial Townsville said increased demand on household income and interest rate increases has seen a decline in the retail market with many retailers looking to close or downsize significantly.

In contrast, the industrial market in Townville remains very strong with Lavarack Barracks, a major Australian Army base located in Townsville gearing up for 5-10 big years because of the Australia- Singapore Military Training Initiative (ASMTI).

According to Mr McCann, “The army’s demand for industrial space, coupled with the robust growth of the agricultural sector expanding into the western corridor, is driving the continuous growth of industrial lease rates and yields.”

Lack of supply driving markets

Mr Andrew Lynch, Principal of Raine & Horne Commercial Toowoomba, asserts that the primary driver of the Toowoomba market is the correlation between the quality of available properties and the level of demand.

“In both sales and leasing we are seeing buyer/tenant demand outstrip supply particularly for quality property that is priced to meet the market,” Mr Lynch said. 

To access the most recent updates on the commercial property markets across Australia, download the latest edition of Commercial Insights now