Ray White Commercial Gold Coast Yield Trends 2015 2016

GoldCoast
Commercial Insights
YieldTrends
2015-2016

From the data, yield producing retail assets were most commonly transacted
over the period comprising of 43%* of all sales. The next highest asset class
in terms of transaction volume was industrial, followed by office and then
mixed-use assets (figure 1).
Given the strong appetite of real estate investors both locally and abroad for
yield, it would appear that retail assets more often than not provide superior
quality tenant covenants usually with big-brand tenants or well-established
local operators in occupation of the space; usually with 3 year leases at a
minimum.
Furthermore, the data indicates that the bulk of the retail assets appear to be
within the $1-$2million range, therefore, increasing accessibility for entrants
into that investment market
Of the 43 transactions that occurred, a majority of the assets were of a free-
hold holding while only 42%* of the assets that transacted were strata-titled
(figure 2).
As reflected in general pricing of most retail assets that sold, retail
assets had the highest proportion of strata-titled sales, while
industrial,officeandmixed-usesaleswerepredominantlyoffreeholdproperties.
Yield trends - Commercial Gold Coast
2015-2016
Overview
*Approximately
Industrial
26%
Office
18%
Retail
43%
MU
13%
ASSET CLASS
Strata
42%
Freehold
58%
HOLDING
(Figure 1)
(Figure 2)
Source: Ray White Commercial Analysis. All numbers are *approximate.
The volume of sales across the Gold Coast has recovered to previous highs over the past 24 months as a sign of growing confidence in Australia’s 4th
largest city.
During 2015-2016, Ray White Commercial Gold Coast has handled $152,030,000.00* in investment transactions across office, industrial, retail and mixed-use
(MU) assets. Over the period, there was a range in yields of between 4.98%* - 10.94%*; with variation due to asset quality and class. This report looks at the
37 yield producing sales that Ray White Commercial Gold Coast negotiated over 2015-2016 and provides some market analysis as to the trends in purchase
yields of commercial assets on the Gold Coast.
$56524000
$12810000
$28150000
$42701000
0
10000000
20000000
30000000
40000000
50000000
60000000
Office Industrial MU Retail
$ Value
Asset Class
TOTAL TRANSACTION VALUE

Commercial Gold Coast*Approximately
Address Suburb Price* Land(m2
)* NLA(m2
)* Date Yield* Freehold/Strata
601 Coronation Drive (1 Booth St) Toowong $45,200,000 2,654 7,222 Aug-16 8.14% Freehold
23 - 25 Scarborough Street Southport $5,420,000 1,715 667 Jul-16 6.85% Freehold
75 Nerang Street Southport $4,325,000 1,245 1,130 Jun-16 7.74% Freehold
14 Ashmore Road Bundall $720,000 506 506 Mar-16 5.63% Freehold
37/58 Riverwalk Avenue Robina $560,000 - 127 Jun-16 8.08% Strata
1704/56 Scarborough Street Southport $299,000 - 85 Nov-15 9.03% Strata
Office
In total, there was $56,524,00.00* in sales across all yield producing office
assets over 2015-2016; representing 6 transactions.
Of particular interest was the sale of 23-25 Scarborough Street, Southport.
The property was fully leased to Westpac Group Ltd (being part of the four
largest companies on the ASX 200 by market cap.) as a retail bank branch.
Comprising of a two-storey, stand-alone building in the heart of the South-
port CBD, the asset was purpose built for Westpac in 2000 who had been in
occupation of the building ever since. Selling for $5,420,000.00* at a yield
of 6.85%* through auction in July 2016, the property was highly sought
after by local and international investors. Westpac had another 3 years re-
maining on the lease with another 5 year option. Furthermore, the property
was located within the Southport Priority Development Area (Precinct 1) and
therefore the land was not subject to a building height limit.
23-25 Scarborough Street, Southport QLD 4215 sold at auction for $5,420,000.00*.
Another sale to note was 601 Coronation Drive, in Toowong.The property was
sold for $45,200,000.00* in August of 2016 on a passing yield of 8.14%*.
The asset offered a modern office building with a secure income profile pre-
senting a 5.2 year WALE (by income).
With a corner site of 2,654m2*
, the property had a total net lettable area of
7,222m2*
over 5 levels of office. With 124* car bays spread over 3 levels of
basement parking, 601 Coronation Drive offered an opportunity to acquire a
significant office investment along a major arterial road in Brisbane and within
a well established office destination. Being 85% occupied at the time of sale
the A-grade office building was tenanted by Jumbo Interactive, Indue,Arthur J.
Gallagher and Queensland College of Teachers.
601 Coronation Drive, Toowong QLD 4066 sold for $45,200,000.00* in August 2016.
With two interest rate cuts already in 2016, and the cash rate hitting a historic low of 1.5% after an August 2016 rate cut of 25 bps, we should see continued
growth in interest for yield producing commercial assets; particularly with strong tenant covenants and/or income upside due through leasing of vacant space. . It is
also commonplace to witness assets transacting at prices slightly above the peak of the last market cycle that ended in 2008.
In the December 2016 RBA meeting minutes, the board members noted that the international environment had been more positive in recent months, while observ-
ing that significant risks to the outlook for global activity persisted. The Chinese economy had remained resilient, supported by expansionary fiscal policy and rapid
growth in financing. International financial markets had interpreted the outcome of the US election, specifically the implications for infrastructure spending, as being
positive for growth and inflation in the United States. Furthermore, rising commodity prices had also contributed to an assessment that the outlook for global inflation
was more balanced than it had been for some time, although inflation remained below most central banks’ targets. The Board also noted that, overall, conditions in
the established housing market had strengthened over recent months.
market commentary
Source: Ray White Commercial Analysis, RBA Meeting Minutes December 2016
All numbers are *approximate.

*Approximately
Over the 2015-2016 period, Ray White Commercial Gold Coast oversaw 9
industrial asset transactions that were purchased on a yield-basis. In total, the
transactions represented $11,435,000.00* in sales value over a combined
net lettable area of 6,038m2*
.
Of interest was the sale of 53 Moss Street in Slacks Creek, which sold at
auction in April 2016 for $2,450,000.00*. The property was prominently
positioned on the corner of Moss and Herbert Streets and as such, was well
exposed to passing trade. The property was sold with a new 5 year lease
(with 2 x 5 year options) to a tenant who had occupied the premises for the
past 24 consecutive years; Right Price Exhausts. With 800m2*
of building area
on 1,138m2*
of land, 53 Moss Street was well positioned amongst major
national tenants such as Autobarn, John Deere, Tyrepower and Jax Tyres. The
property therefore presented an investor with secure income and future upside
for semi-retail conversion. 53 Moss Street, Slacks Creek QLD 4127 sold at auction for $2,450,000.00*.
Another sale of interest was 10 Spencer Road, Nerang. This property of-
fered two stand alone warehouse facilities on the corner of Spencer Road
and Brendan Drive. 10 Spencer Road housed a total of 2,405m2*
of net
lettable space on 6,985m2*
of land highly visible to passing traffic on the
M1. With car parking of up to 50* cars, the asset was sold with vacant
possession, however, with the intent to lease immediately. After a short
leasing campaign, the property was leased for $250,000.00*p.a gross and
as such returned $212,000.00*p.a net. Given this outcome, the property
returned a yield of 6.84%* shortly after purchase.
1/31 Hillcrest Parade, Miami is also a notable sale. Two strata warehouse
units both leased sold at auction for $1,100,000.00* at a passing yield of
7.27%*.With an internal area of 378m2*
, the property was leased to both a
bicycle shop/repair centre, as well as a gym. One of the tenancies had a 5 x
5 year lease in place, with the other on a periodic arrangement.
10 Spencer Road, Nerang QLD 4211 sold for $3,100,000.00*.
Address Suburb Price* Date Freehold/Strata Land(m2
)* NLA(m2
)* Yield*
10 Spencer Road Nerang $3,100,000 Mar-15 Freehold 6,985 2,405 6.84%
53 Moss Street Slacks Creek $2,450,000 Apr-16 Freehold 1,138 800 7.49%
3343 Pacific Highway Slacks Creek $1,350,000 Mar-16 Freehold 1,007 789 6.81%
64 Moss Street Slacks Creek $1,150,000 Jan-16 Freehold 1,146 717 6.91%
43 Hillcrest Parade Miami $865,000 Oct-15 Freehold 817 480 8.78%
29 Lemana Lane Burleigh Heads $775,000 Sep-15 Freehold 673 440 7.17%
1/31 Hillcrest Parade Miami $1,100,000 Feb-16 Strata - 378 7.27%
2/1 Bee Court Burleigh Heads $325,000 Aug-16 Strata 186 8.80%
12/3-15 Jackman Street Southport $320,000 Mar-15 Strata - 221 8.59%
INDUSTRIAL

Commercial Gold Coast*Approximately
Address Suburb Price* Land (m2
)* NLA (m2
3 Cottonwood Place Oxenford $9,600,000 4,275 1,998 Sep-15 7.75% Freehold
5 Cottonwood Place Oxenford $7,300,000 4,568 Dec-16 8.29% Freehold
50 Railway Street Mudgeeraba $5,250,000 3512 1591 Aug-15 8.80% Freehold
39-41 Price Street Nerang $4,400,000 1,137 1,012 Aug-16 8.17% Freehold
48 Nind Street Southport $1,600,000 483 548 Aug-16 6.84% Freehold
MIXED-USE
In total, there was $28,150,000.00* in sales across all yield producing
mixed-use assets over 2015-2016; representing 5 transactions. Mixed-use
assets have been classified in this category as a result of the asset having
both retail and office tenancies. Of particular interest was the sale of 39-41
Price Street, Nerang. The property was fully leased at the time of sale. Sitting
on 1,012m2
* of land on the corner of Price and Lavelle Streets in the heart
of the Nerang commercial hub along Price Street, “Earle House” had recently
undergone a building-wide refurbishment over the 1,137m2
* of internal area.
The property and had a diversified tenant mixture of 12 tenancies across 2
levels, with parking spaces for 25 cars in the basement. With a net income
of $362,961.98p.a*, the asset sold at auction after strong interest from
numerous registered bidders for $4,400,000.00* with a passing yield of
8.17%*. The Department of Transport and Main Roads (Queensland) was a
major tenant within the office component of the property.
3 Cottonwood Place, Oxenford featured a mixed-use retail/office complex
within the heart of the Oxenford commercial precinct. Being fully leased at
the time of sale, the asset sold for $7,300,000.00* in December 2016
at a passing yield of 8.29%*. Spread over two freestanding buildings
(1 x single level, 1 x two level) constructed in 2003, the asset housed
12 tenants across 17 tenancies. Furthermore, the property featured 69
on-grade car parks,was directly opposite strong tradingWoolworths super-
market and was within 400 metres* of Bunnings, McDonalds, Aldi, Kmart,
Woolworths, Caltex, Australia Post.
The asset had a total net lettable area of 1,998m²* on a site area of
4,275m²*, with a net income of $744,012.00*p.a.
48 Nind Street, Southport sold prior to auction for $1,600,000.00* in August
2016. The property is situated on a 483m2
* corner site on Nind Street and
Davenport Street in Southport. With a total net lettable area of 548m2
*, the
property was occupied by Neweys Dry Cleaning on the ground floor with an
office tenant in the upstairs space. Neweys Dry Cleaning is a well established
dry cleaning brand on the Gold Coast which has been in operation since
1993 and has seven locations.
Netting $109,440.00* p.a, the asset provided for secure income with
development upside given its location within the Southport Priority Develop-
ment Area (precinct 1) and therefore the land was not subject to a building
height limit.
39-41 Price Street, Nerang sold at auction for $4,400,000.00* in August 2016.
39-41 Price Street, Nerang sold at auction for $4,400,000.00* in August 2016.
48 Nind Street, Southport sold prior to auction for $1,600,000.00* in August 2016.

*Approximately
Address Suburb Price* Land(m2
)* NLA(m2
2211-2212 Gold Coast Highway Mermaid Beach $9,000,000 1,555 817 Mar-16 4.98% Freehold
141 Maudsland Road Oxenford $8,920,000 7,526 2,267 Aug-15 7.54% Freehold
57/22 Orchid Avenue Surfers Paradise $5,200,000 587 587 Mar-16 10.94% Freehold
3/1 Brygon Creek Road Upper Coomera $3,300,000 3,512 1,531 Aug-15 10.06% Freehold
32 Lavarack Road Mermaid Beach $2,750,000 607 350 Aug-15 6.69% Freehold
2 Saffron Street Elanora $1,440,000 1,453 330 Sep-16 7.41% Freehold
42/5-11 Woodroffe Avenue Main Beach $2,800,000 - 152 Nov-15 7.27% Strata
2/22 Crombie Avenue Bundall $2,200,000 - 617 Oct-16 6.30% Strata
11/2893-2903 Gold Coast Highway Surfers Paradise $2,000,000 - 424 May-16 7.84% Strata
16-17/15 Victoria Avenue Broadbeach $1,300,000 - 130 May-16 9.10% Strata
404/18 Cypress Avenue Surfers Paradise $1,095,000 - 118 Dec-16 7.27% Strata
3/90 Surf Parade Broadbeach $1,088,000 - 123 Dec-15 5.85% Strata
1/2893-2903 Gold Coast Highway Surfers Paradise $1,000,000 - 277 Mar-16 8.03% Strata
9/7 Brown Street Labrador $985,000 - 210 Jun-15 7.60% Strata
20/160 Cotlew Street Ashmore $318,000 - 62 Jun-16 7.56% Strata
6/280 Olsen Avenue Parkwood $270,000 - 59 Nov-16 8.49% Strata
3/124 Pappas Way Carrara $130,000 - 44 May-15 6.92% Strata
Over 2015-2016, there were a total of 17 yield-generating retail
investment transactions negotiated by Ray White Commercial Gold Coast.
Over the period, the total sales value was $43,796,000.00*. Yields
ranged from 4.98%* to 10.94%* depending on the size of the property
and tenant quality on offer. Usually, the properties with more established
local tenants, and/or national-brand tenants with 3+ year lease terms and
triple net covenants, or assets with development upside, attracted higher
prices and thus lower yields.
The most recent retail transaction that occurred was for 404/18 Cypress
Avenue, Surfers Paradise. This property was a strata retail shop on the
ground floor of the Solaire apartment building (constructed by Meriton)
in the mid-2000s. With very strong exposure to Ferny Avenue, the total
internal area of the property was 118m2*
with a brand new five (5) year
lease to a Sushi Train franchise providing for two (2) five (5) year op-
tions. As such, the property offered secure income that could continue
until 2031. The net rent of the property at the time of purchase was
$79,568.80p.a*. Sushi Train is a well recognised Japanese fast-food
brand that has over 47 Sushi Train restaurants around the country.
Retail
404/18 Cypress Avenue, Surfers Paradise sold at auction in November 2016 for
$1,095,000.00*

Commercial Gold Coast
*Approximately
42/5-11 Woodroffe Avenue, Main Beach was of significance given
its strong tenant covenants; leased to both a Subway franchise and a
7/11 convenience store. Both tenants commenced leases in 2009 for
9 years with 2 x 5 year options; both paying for all outgoings. The strata
property sold for $2,800,000.00* in November 2015 at a passing yield
of 7.27%*.
Located at the ground floor retail space of a prominent corner-positioned
Main Beach residential tower, the tenants had a strong captive local
customer base, as well as a significant passing trade due to the position
along Main Beach Parade.
Retail (Cont).
The highest sale price of a yield investment retail asset negotiated by Ray
White Commercial Gold Coast over the period was for 2211-2215 Gold
Coast Highway, Mermaid Beach. With a total net lettable area of 817m2*
over two buildings on 1,555m2*
of “neighbourhood centre” land, the property
boasted three street frontages along the Gold Coast Highway, Lavarack Road
and Chairlift Avenue in the increasingly popular “Nobbys Beach” area.
With 13 tenants, plus an Ooh! Media sign, the property offered a significantly
diversified income stream. As such, the property sold at auction after strong
interest from a number of parties for $9,000,000.00* on a passing yield
of 4.98%*.
In the December 2016 meeting minutes, the RBA noted that growth in GDP of Australia’s major trading partners had picked up a bit over recent months, although
growth remained a little below average. The board members noted that there had been a general improvement in survey measures of global business conditions.
They also noted that the downside risks to global inflation appeared to have diminished somewhat, in part because commodity prices had increased significantly
over 2016 to date. Prospects for fiscal expansion in some countries had also contributed to expectations that inflation would increase. However, inflation had
remained below most central banks’ targets and monetary policies had continued to be accommodative.
Furthermore, the RBA took note of the fact that it is widely anticipated that the U.S Federal Reserve would increase interest rates by 25 basis points at its December
meeting.The US Federal Open Market Committee (FOMC) left the policy rate unchanged at its November meeting, however the RBA noted that markets had fully
priced in an increase in the policy rate at the FOMC’s December meeting and expected a steeper, although still gradual, path for future rate increases owing, in
part, to the fiscal stimulus expected to be pursued by the Trump administration.
The year 2017 also brings the 12-month mark in the lead-up to the 2018 Commonwealth Games on the Gold Coast, and as such, we should see a continued
push in construction of relevant infrastructure; both Games and transport related. The Gold Coast International Airport will see its renovations continue throughout
the year and the second stage of the Light Rail will be in the height of construction.
Given the supportive credit environment in the domestic setting, in the scenario that interest rates within Australia
remain low, and absent a “shock” international economic event requiring significant tightening of interbank lending,
the appetite for quality yield investments remains substantiated.
market Outlook
42/5-11 Woodroffe Avenue, Main Beach sold at a 7.27%* passing yield in late 2015.
2211-2215 Gold Coast Highway, Mermaid Beach sold at auction early 2016.
Source: Ray White Commercial Analysis, RBA Meeting Minutes December 2016
All numbers are *approximate.

YieldTrends
2015-2016
Prepared by:
Frederic Le Fanue
Market Analyst | Commercial Gold Coast
T. (07) 5538 1555
E: f.lefanue@rwsp.net
Important notice: While much care is taken to ensure that the data in this analysis is accurate, RayWhite Surfers Paradise does not provide any guarantee as to the accuracy of the data provided
in any part of this document. The views expressed are of a general nature and do not in any way constitute advice in any form. This commentary is provided as an opinion only. It does
not represent a formal valuation and should not be relied upon or treated as such. In accordance with Company policy this document has been prepared for general use only and Ray White Surfers
Paradise and its analysts accept no responsibility or liability to any other party who might use or rely upon this report in whole or part of its contents. RayWhite Surfers Paradise reserves the right to revise
this commentary at any time. Should there be any errors in the data and/or analysis in this document, please do not hesitate to contact the analyst responsible for preparing the report in order to ensure
that any errors can be corrected as soon as practicable.
All numbers are approximates only.
GoldCoast
Commercial Insights
FOR:
Commercial Gold Coast
Level 2, 50 Cavill Avenue (PO Box 765)
Surfers Paradise QLD 4217
Phone: 07 5555 8600
Fax: 07 5555 8610
Email: info@rwsp.net

Ray White Commercial Gold Coast Yield Trends 2015 2016

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