GAMES TO DRIVE MARKET HIGHER
Booming interstate migration and the announcement of South East Queensland being the preferred location for the 2032 Olympic Games, has a leading pundit excited about the impact on the local Gold Coast industrial market. But there could be a sting in the tail with owners being warned about the impact this may have on their hip pocket.
“We are being inundated with calls from businesses wanting to move to the Gold Coast from Sydney and Melbourne”, said Josh Wright, Director of Crew Commercial. “With local industrial land prices at an all time high, this strong population growth together with the expected increase in demand to accommodate an event such as the Olympic Games, will put further pressure on dwindling supply”.
The agent reports that industrial land prices have increased 10% over the last 12 months. This is off the back of a 20% increase in the preceding three years.
“This time last year typical industrial land parcels were trading in the early to mid $500/sqm ex GST. Last week a freehold undeveloped land parcel of about 2,500/sqm in Carrara sold for $1,500,000 ex GST reflecting a rate in excess of $600/sqm.
“With the low interest rate conditions and improved local business sentiment having navigated through the obvious recent challenges, average pricing has now jumped to about $600/sqm for the Central Gold Coast region. We have seen rates of up to $800/sqm in Burleigh with the developers needing to get upward of $4000 to $5000/sqm for strata-titled developments. And most importantly that end product is selling.
“There has been a realisation in the market of the lack of developable industrial land sites between Coomera and Burleigh. Many existing businesses operating in this area are seeking to grow their warehousing or manufacturing capabilities but are being hampered by the inability to find suitable sites. Add to that the increase in demand from developers wanting to build strata-titled units targeted at small businesses and the ever growing self-managed superannuation market, then rates are inevitably climbing.
“We are also finally seeing solid evidence of a jump in rental rates. Over the last 10 years there has only been a modest increase of about 10% for net rental rates, however the recent increase in land pricing has meant developers are chasing rates of about $140 to $160/sqm for a new unit development which would have previously leased at $120/sqm ex GST.
“The same trend has occurred for freestanding buildings with incentives needing to be offered falling over the last twelve months”.
“There are two sides to the coin though”, stated Mr Wright. “The upward pricing of the underlying land will flow through to the State Government’s assessment of land values. This will increase land tax. Landlords typically pass this bill onto their tenant – once existing tenants calculate that their total rental bills are increasing due to larger land tax bills then the underlaying net rentals may need to be adjusted at option periods to remain affordable. Alternatively if the landlord is providing a gross rental, meaning the rate the tenant pays is wrapped up into the one amount, then the landlord will foot the bill of the higher taxes as they will be unable to recoup it from the occupier. Either way, it will be the landlord that pays at the end of the day.”
