The struggling far north Queensland Cairns office market is expected to improve in 2013, with a brighter economic outlook for the state economy.
The tourism-dependent Cairns economy and property market took a battering in the wake of the GFC, with employment figures falling, and has not benefited from mining investment in other regional Queensland areas.
Cairns is the gateway to the Great Barrier Reef and a short drive from places like the Daintree Rainforest.
As a result the local office market, which serviced local industries in Cairns, slumped as well – the market covers offices in the town centre, a smaller selection of office buildings in Cairns North, which is that part of the town north of Upward Street, following Sheridan Street towards the airport.
According to property valuers Propell, the Cairns market did not decline further as a result of the two-tier economy in Queensland is expected to benefit from an increase in Asian tourist visits with Jetstar added further Cairns flights from September, while China Eastern commenced 3 flights a week from Shanghai to Cairns since the end of October.
A Propell survey of 100 office buildings on the market found that there is a “considerable surplus of space on the market, and in most cases rents are negotiable for a prospective tenant”.
“There are no vacancy figures available for Cairns. However currently there is some 33,000 square metres of commercial space advertised for lease, which is down from a figure of 42,000 square metres surveyed in July 2012,” says Propell.
A typical rent for a Cairns office is around $200 per square metre gross, inclusive of outgoings.
Incentives are in the region of around 30% plus.
"The outlook for office values in the Cairns region is improving, and lower interest rates and improved economic conditions will make office space here more attractive, with values likely to increase in the coming year,” according to the report prepared by Propell analysts Linda Phillips and James Spencer.
According to Propell, the office market has been steady, though there have been just two commercial office sales, compared with six in 2011 with a total sales value of $6 million.
Propell expects the number of sales to increase as the year draws to a close.
“In terms of numbers, most demand is for smaller properties of less than $1 million, easily affordable for purchase by small business, and this accounts for some seven sales a year, rising to 14 in years of high demand.
“Smaller offices are most popular, in the price bracket of $250,000 to $1 million where owner occupiers can purchase their own property, or they can be purchased as a small investment.
“In this bracket, sales average around four a year, with a median price that has been oscillating. With few recent sales it is estimated that the median price is around $400,000 and steady.