Issue 51 | The Property Development Review

QLD MARKET OVERVIEW

QUEENSLAND

Nick Dowling Managing Director - Colliers Sunshine Coast

Regional real estate market saw a surge in activity and demand during Covid. How have these markets fared in more recent times? Market activity has definitely steadied in recent times. This can be put down to two main factors: 1. The impact of rising interest rates has seen buyers yield expectations change to keep up. This has resulted in opportunistic sellers retreating from the market and fewer aggressive buyers willing to pay the premium yields we were getting. Having said that, there are still instances where strong yields are being achieved, particularly in the industrial sector or where there is a likely uplift in density on a commercial site. 2. The increase in construction costs has slowed new development across all sectors. We are still seeing strong growth in land values but some developments have stalled due to them no longer being feasible. Our skyline is still littered with cranes up and down the coast but there is more focus on A Grade quality stock where the sale revenues are higher. Thinking specifically about commercial and industrial property, where has the demand been coming from? The Sunshine Coast is still experiencing strong population and business growth which is resulting in the expansion of existing businesses as well as new businesses coming to the coast. Industries related to health and construction have been particularly active across both the commercial and industrial markets. We are also starting to see a bit more enquiry from larger storage and distribution facilities with online retailers expanding. From an industrial perspective, a lot of demand and activity has been in the take up of small industrial units from owner occupiers and investors. The trend of retirees downsizing to units and buying an industrial shed for storage has been prevalent as well. How has feasibility for residential development sites been impacted by interest rate instability and building costs in regional areas? And have you seen developers moving away from residential into other sectors like industrial or mixed-use development? If anything, we have seen a surge in demand from developers for residential land subdivisions with the market now acutely aware of the longer-term supply issues our region is facing. Medium density residential developments have been more affected by construction cost risk than interest rate instability. This sector is being dominated by developers that also have a construction arm. They have the ability to build product at more affordable levels and the most active developers are locals who understand the market nuances. The cost of industrial land is making it hard for developers to stack things up at the moment, particularly at the larger end of the market. There is still demand for smaller units but once again, it is the local builder developers that seem to be the most aggressive developers in this sector. How do you foresee regional property across the various asset classes faring as we enter a period of interest rate stabilisation and possible declines? Through the 2020 – 2023 period, we saw yields reach levels at or below the cost of borrowing. Money in

NICK DOWLING

70 – April / May 2024

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