Aura Business Park
Owner’s Report - Q3 2024
Aura Business Park Summary
Welcome to our quarterly wrap up ofAura Business Park.
Much has happened since December last year, both locally and nationally, that has played a hand in shaping the current state of theAura market. We have seen some record sale and lease rates achieved, a shift in supply numbers of certain building sizes and some larger economic drivers that have us shifting a few key predictions for what is coming next quarter.
The following report is designed to give you the insights and market knowledge necessary to help you make better commercial property decisions. We start with a look at the national market drivers before zooming in to more local activity and the actual lease, sale and building stock levels atAura. We’re lucky to have the largest active team in the Northern Corridor providing us with real time market feedback from hundreds of enquiries per quarter.
We trust you will find some useful insights in this report and invite you to call up or call in to our office and discuss what this all means for your specific property and where the opportunity might be for you.
Market Drivers
“These are the market factors that are shaping the landscape for your Aura property in the coming year”
- Michael Shadforth, Director
POPULATIONGROWTH
The Sunshine Coast is projected to grow from 350,000 to over 510,000 in the next 15 years. With 50,000 new residents projected to occupy 20,000 homes, Aura represents 80% of the Sunshine Coast’s current residential expansion pipeline. Stockland’s proven track record at delivering similar projects has given other developers and businesses alike the confidence to make bold growth assumptions andpositionthemselvesearlytocapitaliseonthepotentialinthisarea.
LANDSUPPLYCONSTRAINTS
The next five years in particular will see further tightening of what is already a chronic supply shortage of industrial land in the region. Vacant industrial rates have increased from $215m2 in 2020 to over $500m2 in 2024. A recent third party Needs Analysis identified that the Sunshine Coast has an industrial supply shortage of178ha,whichistheequivalentoftheentireHarmonyestate.
CONSTRUCTIONCOSTS
Construction prices have been a major source of the CPI issues that drove the interest rate hikes of 2023. There has been a perfect storm of international conflict, labourshortages,fuel,materialsandcompetinginfrastructureprojectsimpactingall facets of commercial construction. The South East Queensland market has been impacted more than most areas due to the Olympic infrastructure pipeline of projectsthathastakentier1buildersoutoftheprivateindustrialconstructionpool.
AFFORDABLEHOUSING&LABOUR
Industrial businesses across the country are struggling to access the necessary skilled labour and housing affordability and cost of commuting are the two factors that dictate workforce location. The Sunshine Coast has the potential to supply close to 40,000 new homes, spurred on by the Government’s Affordable Housing mandate. This is proving doubly attractive for businesses in the trade services and buildingsupplyindustries,whowanttopositionthemselvestoservicingthedemand from the same residential construction projects that this new labour force will call home.
Demand Summary
The following is a summary of what our team is seeing at the coalface of Aura Business Park property activity over the last quarter:
OWNER OCCUPIERS:
While the run of interest rate rises in 2022-23 cooled the market off somewhat, this was offset by a massive increase in equity of many homeowners across the Sunshine Coast. The result has been that owner occupier demand has remained quite buoyant, as they can access equity in their home to subsidise their commercial purchase.
INVESTORS:
At the start of the year we predicted an increase in activity from investors transitioning from residential to commercial, due to the tightening restrictions on residential landlords. This has definitely been the case. The settling of inflation and stable interest rates, combined with confidence in the greater Sunshine Coast growth and supply/demand metrics have given investors a more bullish outlook than we saw at the start of the year. Unfortunately these new investors are concentrated in the smaller end of the market, where tenant vacancy rates are currently the highest.
Much of our work is going into helping buyers understand the replacement costs, land constraints and population demands of this area are, so they do not get fixated on passing yield. In spite of this, buyers do not quite have the confidence to buy vacant and trust the absorption rates. While there have not been a high volume of tenanted sales, the yields achieved have been at or under 6%, compared to the trend towards mid-6% yields at the start of the year. This has been driven by low stenanted stock volumes and the confidence in capital growth projections due to high comparable land and construction prices for future stock.
TENANTS:
Demand from businesses in the last quarter has continued the trend towards larger footprint buildings (500m2+). We have seen multiple small shed projects reach completion at similar times. This, combined with the softening in demand in this sub 300m2 range, is pushing out our average days on market. Stand alone buildings over 1,000m2 remain the most sought after product and the rates being achieved by our team have now pushed through the $170m2 net bracket.
Regardless of size, building functionality and inclusions remain the key considerations for tenants looking to relocate. The rapidly increasing rent rates and outgoings over recent years makes for some interesting initial conversations, but Caboolture remains at the lower end of comparable prices.
“Watch for the sub-200m2 investor market to regain a bit of lost momentum as residential investors make the shift to avoid the coming tenant protection and negative gearing turmoil”
-Ashley Rees, SeniorAnalyst
The following is a summary of all the transactions completed inAura in the last six months:
Sales: 14 sales worth $10,013,941 at an average sale rate of $3,701m2
Leases: 19 leases across 6,117m2 at an average net rent of $187m2
Stock Summary
We see the bulk of our current stock for both sale and lease falls in the sub 300m2 range, with a limited number of warehouses exceeding 1,000m2 also available.Those developers yet to build should be interested in the persistent gap in available stock within the 300-1000m2 range. Recent transaction data show 88% of our sale and lease transactions falling within the sub 300m2 range, indicating sustained demand in this segment. We expect the strong recent enquiry in the 1,000m2+ stand-alone bracket should yield results for those owners in the coming quarter.
Current Sale Stock on Market
Current Lease Stock on Market
Construction Progress
