Oracle commercial precinct on Broadbeach listed with $50 million hopes, with Gold Coast office vacancy rate at 21.5%

Nearly 11,000 square metres of A-grade commercial space at the base of the twin-tower Oracle development in Broadbeach on the Gold Coast has been listed for recievership sale, with the market estimating a sale  around $50 million.

The listing of the commercial space comes as a new report by the Property Council of Australia finds that the office vacancy rate on Broadbeach tightened noticeably over the first six month of the year from 16.8% to 11.1%,  well below the 21.5% vacancy rate for the Gold Coast office market as a whole.

This time last year, the Broadbeach vacancy rate was 30.3%.

The office and retail precinct of The Oracle comprises four detached buildings known as Oracle North, Oracle South, Oracle East and Oracle West, centrally serviced by Oracle Boulevard and bounded by Charles and Elizabeth Avenues and Surf Parade.

The commercial precinct forms the base of the troubled residential development which comprises 507 luxury apartments across two towers.

The A-grade office component, comprising 6,731 square metres of net lettable area over two levels, is fully leased with 22 separate tenancies, including leases to Gold Coast Tourism, listed housing developer Villa World and radio station operator Southern Cross Austereo.

The retail space has 4,005 square metres of net lettable area, with leases to fashion retailers Mimco and Witchery, as well as restaurant chains Max Brenner, Bavarian Bier Café, Crust Pizza, Guzman Y Gomez and Mecca Bah.

The commercial precinct is being sold by Mark Witheriff and Rem Rafter of CBRE through than expressions-of-interest campaign targeting both national and international markets, including Asia, where it will be promoted via a roadshow.

The 100% A-grade office occupancy rate at The Oracle contrasts starkly with the overall state of the Gold Coast office market, which has the highest office vacancy rate in Australia, according to the latest Property Council report for the first six months of 2012.

The Gold Coast office vacancy rate tightened marginally in the first six months of the year from 22% to 21.5%.

However, it is still more than double that of the Brisbane fringe market (8.5%) and Brisbane CBD (7.9%).

And it remains well above the next worst performing fringe market – the Sydney fringe market of Chatswood, where the vacancy rate eased from 10.7% to 13.7%

“A total of 4,292 square metres was added [on the Gold Coast] over this period, which was almost balanced out by withdrawals of 3,453 square metres and absorption of 2,723 square metres,” says Queensland executive director of the Property Council of Australia Kathy MacDermott.

“All grades, except for B-grade, experienced slight vacancy decreases over this period.”

“With only 1,723 square metres due to come online in the second half of 2012, this should provide the market with further room for absorption.”

Prospective buyers of the Oracle will take note that the Property Council report recorded vacancies tightening noticeably in Broadbeach over the six-month period from 16.8% to 11.1%, significantly lower than the 30.3% vacancy rate recorded at the same time last year.

This was in contrast to other office locations.

“The Southport and Robina-Varsity Lakes markets experienced little change, with decreases of 0.7 and 1 percentage points, respectively,” says MacDermott.

“Both Bundall and Surfers Paradise saw vacancy increases, with Bundall up by 0.8% to 32.1%, its highest level in more than 19 years.

“The Surfers Paradise vacancy rate increased by 1.6 percentage points over the six months, to reach a staggering 28.5%.”

“While certain markets across the Gold Coast remain depressed, Broadbeach is edging towards healthy vacancy levels. As work on major projects such as the Commonwealth Games and the Gold Coast Rapid Transit increases, this will help the market will begin its gradual recovery,” she says.

Witheriff calls the Oracle “one of the most vibrant mixed-use developments in Australia and a proven drawcard for quality commercial and retail tenants”.

“The strong cashflow supported by the national and international tenants with long-term leases has made this world-class precinct a proven performer even in a challenging market,” he says.

The $850 million Oracle project was developed by South Sky Investments, a subsidiary of  Niecon, part of the Nikiforides Group.

It has been in the hands of receivers KordaMentha since December 2010 after the Nikiforides family's Niecon business ran into trouble when a financier withdrew from the project.

A sales campaign to sell the remaining apartments within the two towers commenced in December last year.

Sales have picked up recently, led by interest from local buyers. Gold Coast residents have bought $20 million worth of the 505 apartments.

Peppers Retreat, Resorts and Hotels has been given letting rights to Tower 1, which has been renamed Peppers Broadbeach.