A shortage of commercial stock, rising rents and a constrained development pipeline have been quietly building a compelling case for the Gold Coast commercial market.

Now, the Federal Government’s proposed tax changes on negative gearing and capital gains tax look set to direct even more capital its way.

Kollosche commercial sales agent Adam Grbcic believes the commercial sector could be the natural landing point for much of that redirected capital.

“The key difference is that residential investors are generally looking for capital growth over time, whereas a commercial investor is looking for cash flow,” Adam says.

“So, with capital gains tax breaks reduced in the residential sector, investors will be drawn to sectors with more advantageous tax perks.”

Commercial leases are typically structured over three to ten years with fixed or CPI-linked rent reviews and outgoings met by tenants.

This offers investors income certainty that established residential investment, under the new tax settings, will struggle to match.

“An investor who has traditionally bought established residential for the capital growth story now needs to think differently about how they structure their returns,” Adam says.

“When you run the numbers on commercial, particularly in a market like the Gold Coast, it stacks up.”

The Gold Coast is well placed to absorb the anticipated spike in interest.

Industrial vacancy rates across the city’s key precincts sit at historically low levels, while A-grade office space is at about 2.7 per cent vacancy. Across all commercial asset classes, demand is outpacing supply.

Adam says the imbalance is unlikely to correct quickly.

“We’re in an environment with rising construction costs,” he says. “This makes it more and more difficult to deliver viable developments and address the supply issues we have across asset classes in the commercial sector.”

With fewer new projects completing, pressure on existing stock only intensifies. Rents are rising and yields, already competitive relative to residential, are compressing as capital values strengthen.

“With the shortage comes upward pressure on rentals, a compression of yields and an overall strengthening of the commercial market,” Adam notes.

For those yet to enter the commercial market, the window to do so ahead of a new wave of investor demand may be narrowing.

To find out more about the Gold Coast commercial market, contact Adam Grbcic on 0404 087 772 or Tony Grbcic on 0407 968 667.