Coastal office markets witness growth amid changing demographic trends

In recent years, particularly in regions like the Gold Coast and Sunshine Coast, there has been a significant increase in demand for office spaces, contrasting with national trends of decreasing office footprints due to the popularity of working from home. This upward movement in coastal regions has been driven by population shifts during the pandemic, leading to an influx of people moving away from metropolitan areas and into southeast Queensland. However, it raises the question of whether the allure surrounding these office markets remains strong.

Before the onset of COVID-19, both the Gold Coast and Sunshine Coast were already experiencing upward trajectories in new business startups. This pattern accelerated from 2019 to 2023, reaching peak business numbers in June 2023 before a slight decline. The population growth and subsequent rise in business activities necessitated an increased demand for various types of accommodation, including office spaces. Consequently, office vacancies in these markets saw a significant reduction from 2019, with the Gold Coast’s rate dropping from 11.6% to 6.4% and the Sunshine Coast’s from 21.9% to 5% by 2024.

In contrast, New South Wales coastal CBDs like Newcastle and Wollongong have faced challenges such as supply issues, demographic uncertainties, and divergent business trends. Wollongong, despite its growing university presence contributing to a slowly revitalising city centre, has struggled with new office stock absorption, leading to a vacancy rate of 14.7%. Newcastle, while more established, hasn’t witnessed sufficient population growth to significantly enhance its CBD, with vacancy rates reaching 16.4% due to uncommitted projects completing and expanding the market size.

Vanessa Rader, Head of Research at Ray White, noted, “Both Gold Coast and Sunshine Coast have recorded strong quarterly gains in new business starts well before COVID hit.” She further highlighted the distinction between these markets and others, stating, “Interestingly, we have seen an opposite trend in the NSW coastal CBDs of Newcastle and Wollongong hindered by supply, population uncertainty, and differing business trends.”

Over the last 12 months, the performance of these markets has varied. The Gold Coast’s lack of new stock has limited further improvements, with a slight increase in vacancies despite a clear preference for high-quality, prime grade stock. Similarly, the Sunshine Coast experienced its first negative uptake since 2015, although demand for A-grade stock remains high. Newcastle and Wollongong, however, have shown some positive movements, with Wollongong posting the best annual net absorption among the four markets, and Newcastle experiencing overall positive net absorption despite challenges.

While it is unclear if these markets will continue to benefit from population movements, the demand for high-quality office spaces and business expansion suggests a growing local economy. Rader remains optimistic, asserting, “Despite this, demand for high-quality spaces and the expansion of businesses are a tell-tale sign of a local economy growing in vibrancy, therefore optimism remains high.”