Gold CoastCommercial Brief

November 2016

November saw seventeen commercial transactions negotiated by Ray White Commercial and Industrial offices under the Ray White Surfers Paradise Group. In total, the combined value of sales was $25,921,500.00, with just over half of the assets selling to own-er-occupiers, and the rest to private investors. Across all investment purchases, we saw a range in sale yields from 6.30% to as high as 10.56%; depending on a number of factors such as lease length. A majority of transactions were for industrial stock, with development sites being the next most common asset class to sell.

Notable sales this month included the Endeavour College of Natu-ral Medicine at 105-107 Scarborough Street, Southport, which sold

at 10.56% passing yield for $3,950,000 at auction; marketed by Steven King. Steven also negotiated the sale of 2251 Gold Coast Highway for $4,750,000 at a yield of 7.10% as a result of a sub-two year lease. Another notable sale was for 2/22 Crombie Avenue, Bundall, which was the ex-BBQs Galore showroom on the corner of Bundall Road and Crombie Avenue. Leased to a well-established furni-ture shop (ALL Furniture), the strata showroom sold prior to auction for $2,200,000 reflecting a yield of 6.30%. The property was marketed by Simon Robertson and Brad Merkur. 5 Millennium Circuit is also a notable sale of the month selling at 6.85% passing yield for $1,750,000. The prop-erty was tenanted by Lendlease Ltd with a new lease in place for 2 years.

Address Suburb Asset Class Holding Land (m2)* $/Land* NLA (m2)* $/NLA* Price* Yield*

62 Queen St Southport Development Freehold 761 $1,432 150 $7,267 $1,090,000 Vacant

60 Steven St Bundall Development Freehold 803 $872 - - $700,000 Vacant

46-52 Wagawn St Tugun Development Freehold 1,887 $1,298 - - $2,450,000 Vacant

15-17 Waverly St Southport Development Freehold 1,414 $1,768 - - $2,500,000 Vacant

285 Southport-Nerang Rd Southport Industrial Freehold 5,183 $791 2,300 $1,783 $4,100,000 Vacant

7 Windmill St Southport Industrial Freehold 405 $1,704 207 $3,333 $690,000 Vacant

102251 Gold Coast Hwy Mermaid Beach Retail Freehold 979 $4,851 805 $5,900 $4,750,000 7.10%

5 Millennium Circ Helensvale Industrial Freehold 1,654 $1,058 783 $2,235 $1,750,000 6.85%

7/511 Olsen Ave Molendinar Industrial Strata - - 153 $1,833 $280,500 Vacant

9/225a Brisbane Rd Biggera Waters Industrial Strata - - 144 $2,014 $290,000 Vacant

3/11 Bailey Cres Southport Industrial Strata - - 44 $2,727 $120,000 7.80%

4/11 Bailey Cres Southport Industrial Strata - - 53 $2,170 $115,000 8.13%

1/11 Bailey Cres Southport Industrial Strata - - 43 $2,674 $115,000 9.04%

2/11 Bailey Cres Southport Industrial Strata - - 53 $1,925 $102,000 9.17%

2/174 Galleon Wy Currumbin Office Strata - - 276 $2,605 $719,000 8.20%

16/105-107 Scarborough St Southport Office Strata - - 1,276 $3,096 $3,950,000 10.56%

2/22 Crombie Ave Bundall Retail Strata - - 610 $3,607 $2,200,000 6.30%

Source: Ray White Commercial Analysis, all numbers are approximate.

commercial & INdustrial brief November 2016

November Transactions - Sales

Overview

2/22 Ave. Bundall sold for $2.2m prior to auction.

*Approximately

Outline Indicative Only

INdustrial & Commercial Gold Coast, Southport

The past 60-day period has seen a strong level of transactions occur in the office leasing market on the Gold Coast. While a few deals have been the result of a few months of negotiation, they have all come to a close this month. In total, there were nine transactions that were conducted by Ray White Commercial Gold Coast, with a total first year lease value of $822,030.00.

“It appears that this month we have seen a number of offices upgrade in both size and quality of premises. A comforting occur-rence has been the strong number of transactions this month.” Renee Hughes (Office Leasing Executive)

Address Suburb Start Date Rent p.a* Rate/m2* Size (m2)* Term (years)

Gold Coast Highway Miami T.B.C $126,000.00 $300.00 428 5x5

Elkhorn Ave Surfers Paradise 01/11/2016 $102,375.00 $325.00 315 3x3

Upton St Bundall 01/10/2016 $88,200.00 $280.00 315 3x3

Marine Pde Southport 29/09/2016 $36,000.00 $300.00 120 1x2

Ferny Ave Surfers Paradise 01/10/2016 $120,450.00 $330.00 365 3x6

Elkhorn Ave Surfers Paradise 17/10/2016 $40,000.00 $310.00 129 3x3

Surfers Paradise Blvd Surfers Paradise 15/11/2016 $22,800.00 $190.00 120 1x1

Ouyan St Bundall 01/01/2017 $142,205.00 $425.00 334.6 2x2

Gold Coast Highway Mermaid Beach 01/02/2017 $144,000.00 $345.00 420 5x5

November Transactions - Office Leasing

Source: Ray White Commercial Analysis, all numbers are approximate.

November - in focusoffice leasing

the pulse - a selection of agent Snippets:

Development Sites:Brad Merkur - Development Site Specialist “We are still seeing transactions occurring, given the right amount of time and the discovery of the right purchaser who has access to capital and the facilities to execute a development quickly.”

Commercial Southport:Luke Boulden - Retail/Office Sales & Leasing Specialist “Southport is really starting to strengthen as whole - with the upswing of the Commonwealth Games, major infrastructural upgrades and fast track development and zoning approvals under the current town plan PDA, we’re seeing an increase in demand across all commer-cial sectors. Brand new, boutique developments are being completed creating a surge in higher end apartment buyers, and piggybacking off that trend as more professional and international residents move into the CBD, we’re generating a strong cultural background with new and trendy dining and entertainment precincts. In addition to an increase in retail tenancies, demand is strong amongst professional services for quality office stock within the CBD also, with Southport currently seeing one of it’s lowest office vacancy rates since pre-GFC times.”

Industrial Sales:Steve Macgregor - Sales Director Industrial Gold Coast“Investors are moving on industrial property with yields ranging from 6.5% - 8%. This is widely due to the lack of industrial land on offer and coupled with record low interest rates, it’s never been a better time to buy. Vacant Industrial Strata units are selling for $1800 - $2200 per square meter in the areas of Burleigh, Nerang, Molendinar, Arundel and Upper Coomera.”

For more information, please contact our reception.

Level 2, 50 Cavill, Surfers Paradise 4217, QLDPO Box 765, Surfers Paradise 4217, QLDP. (07) 5538 1555 F. (07) 5570 1344

*Approximately

Source: Ray White Commercial Analysis, CoreLogic, NewsCorp, all numbers are approximate.

General property Sales News:

Office, SouthportA refurbishment and leasing program lies ahead for 9-15 Bay Street Southport; the KRG Centre. The centre sold for circa $12M to Lions-gate Income Fund No.1, a passing yield of 8.3%. The property sits on 2,534m2 of PDA precinct 1 zoned land.

Industrial, Southport1/9 Bailey Crescent sold for $400,000 to an owner-occupier at a rate of circa $1,000m2. The site was a former seafood distribution facility.

Industrial, Burleigh Heads70 Hutchinson Street, a 3367m2 site with 2,656m2 of usable space and high-impact industry zoning exchanged hands at circa $1.1M. There was a high level of inquiry from owner-occupier interest due to the shortage of high-impact industrial land available on the Gold Coast.

10 Ramly Drive, a 1829m2 parcel of low impact industry zoned state government land has sold for $840,000.

12 Greg Chappell Drive, with a brand new three-year lease to Secret Liai-sons (a brothel), has sold for $1M. The 2,031m2 site and 400m2 building was acquired at a yield reflective of 8.7%.

Industrial, Arundel27 Gibbs Street sold to TradeTools for $1.95M. The property sits on 2,116m2 and has 957m2 of floor space, as well as 232m2 of administra-tion/operations area. It is said that the asset was purchased to facilitate Tra-deTools’ expansion on the Gold Coast. The company currently has stores in Burleigh, Ormeau and Nerang.

A strata unit at 2/19 Harrington Street has sold at a yield of 6.53% for $1.4M to a local investor. The newly built duplex has 732m2 of office/warehouse and 10 car spaces. R.A.G Pty Ltd is the tenant on a three year lease. R.A.G Pty Ltd own Tarocash and Rockwear clothing brands.

Industrial, Gaven45 Newheath Drive sold for $823,000, at a rate of $411.50/m2 for the 2,000m2 parcel of land. At present, there is no publicly disclosed intention for the site. However, the land sale rate is higher than the record set in January for a 9,404m2 site which sold at $400/m2.

Retail, Labrador10A Frank Street sold for circa $3.2M. Sitting on 2,955m2 of land, the 700m2 building includes 45 carparks and is zoned medium-density res-idential. At present, the building has potential for four tenancies, however, is only half occupied.

Retail, Biggera WatersThe Harbourside Markets, opposite Harbour Town has sold to the owner of the neighbouring Treasure Cove Super Centre for $7.25M. The 7,382m2 site at 610 Oxley Drive has a 1,600m2 retail and leisure building.

Retail, Palm BeachThe McDonald’s and 7-11 Petrol Station at the corner of 19th Avenue and the Gold Coast Highway at Palm Beach has sold for $8.525M to a private Brisbane investor. The 3,011m2 corner lot had long leases in place to the two brands and the sale reflected a yield of 5.46%.

Development Site, Mermaid Beach182 Hedges Avenue has sold for $1.7M. Sitting on 405m2 of medium density residential land across the road from the beach, the building has three apartment units of separate title that were offered in one line and with vacant possession.

47-49 Hedges Avenue sold for $7.7M, being the highest price paid for land in Mermaid Beach. The property was purchased by John Potter.

Corporate News

Sunland Group Ltd has 3,300 properties in its Gold Coast pipeline at an end value of circa $2.17B. The group expects FY17 net profit to climb to $35M, an 11% increase in profit from the $31.5M posted for FY16.

breaking development activity

Residential, Hope IslandA $650M master-planned community at Hope Island (Serenity Cove) is about to be released to the market. The waterfront community will host 465 homes around an 18ha lake. So far, $25M has been spent on civil works. The development will feature a marina and a 3,800m2 retail and dining precinct, with one-third of the entire site kept as a nature reserve.

Industrial, YatalaA cardboard manufacturing plant with 24/7 operation has been ear-marked for a portion of the Frasers Property Groups 52.7ha site at 146 Pearson Road. The asset will be a 22,500m2 plant with 1,100m2 of office space and 120 parking spaces. The application for the devel-opment has been lodged and is awaiting approval.

*Approximately

Source: NewsCorp, all numbers are approximate.

global events & trends

The USA Election:On November the 7th, the people of the United States of America voted in Donald Trump as their next president. He will officially take office once sworn in on the 20th of January 2017. This was probably the most widely covered election of the past decade, and as such, I will not put you through it all again. In a nutshell, Trump wants to reinstate the “American Dream” by protecting its domestic industry, and reinvigorate the economy. There is probably a large amount of economic positives that will come from some policies of his, and from what has happened so far, he has constructed a well-experienced cabinet to support. We shall see how this goes.

Bond Bubble Deflating:The unwinding of the largest bond-bubble in history has started to occur. Though not necessarily a bad thing, the unwinding is a nec-essary process of the world returning to a more normal inflationary environment. Remember when the global economy got injected with all this QE (Quantitative Easing) through “money-printing” and lowered interest rates? Well, this went hand in hand with a global consensus being that inflationary forecasts over the period between 2009-2016 were next to nothing. When the economic growth outlook is weak, investors turn to bonds for a reliable source of yield; particular government bonds of countries with reputable legal systems. However, what we have seen is an unparalleled demand for yield – the “hunt for yield”. As demand for something increases, so does its price. This is what we saw with bonds on a global scale. As yields on all assets globally compressed due to imposed low investor expectation for returns resulting from the artificially low cost of money, the chase for yield into bonds was magnified by the fact that investors expected QE to continue, and therefore, the “hunt for yield” to continue and so to the rise in prices of bonds.

In fact, towards the middle of the year, we saw around 30% of global government bonds giving negative real returns. Bond premiums, as the name suggests, should be positive. However, at the height of the bubble mid-year, investors were happy to lose capital on bond investments if held to maturity; though this perhaps was a sign of mania itself as investors bought the bonds not to hold onto them, but instead, to merely sell them at a profit as the prices increased in the very short term.

Since Trump was elected, his policies have been deemed to be very inflationary. High inflation is the enemy of bond values, and as such, we have seen an unraveling of this demand for bonds as investors sell out and allocate capital back into equities, real estate and other assets that benefit from an inflationary environment.

Source: Ray White Commercial Analysis, Bloomberg, Reuters. The views of the analyst are not necessarily reflective of the views of RWSP.

INdustrial & Commercial Gold Coast, Southport

Source: Bloomberg

As Bond Prices Rose, Yields Plunged

*Approximately

RBA Monthly View: November

Cash Rate: ON HOLD at 1.50%

Inflation rate: 1.30%

Summary:In the November meeting, on Melbourne Cup day, the RBA kept the of-ficial cash rate on hold. The RBA noted that the run of international and domestic data over the past few months had been consistent with earlier expectations and there had been little change to the forecasts since they were presented in the August meeting.

The global economy was continuing to grow at a lower-than-average pace. The steadying of economic conditions in China had reduced some of the downside risks to the global growth outlook in the near term and had been accompanied by an increase in commodity prices.

Members noted that assessing conditions in the housing market had be-come more complicated. While overall conditions had eased relative to 2015, some indicators had strengthened over the previous few months. In particular, housing price growth had picked up noticeably in Sydney and Melbourne. However, housing turnover and growth in housing credit both remained lower than a year earlier, consistent with the supervisory measures that had been taken to tighten lending standards and the more cautious attitude to lending in certain segments.

Employment:Recent data confirmed that employment growth had been concentrated in part-time employment and had continued to decline over recent months. In addition, the participation rate had fallen to levels last seen in late 2014. Members noted that the current experience of relatively strong growth in part-time employment (compared with full-time employment) was unusual insofar as such a pattern was typically associated with rising unemployment rates. While the unemployment rate had declined in previous months and over the previous year, the underemployment rate had remained elevat-ed. The unemployment rate was expected to edge lower, which was little changed from the outlook presented three months earlier.

Wage growth had generally been lower than implied by its historical rela-tionship with the unemployment rate. The decline in wage growth had been a helpful part of the adjustment of the economy to the end of the resources boom. The depreciation of the Australian dollar was also helpful, although that had occurred later and was somewhat less than inferred by its historical relationship with the terms of trade.

Commodity Prices & Terms of Trade:Turning to the latest forecasts, which were little changed from those pre-sented three months earlier, members observed that bulk commodity prices had increased significantly since the beginning of 2016. Members noted, however, that there was significant uncertainty about the outlook for the terms of trade, partly because of uncertainty about the outlook for the Chinese economy.

International Economic Conditions:Growth in Australia’s major trading partners had been a little below aver-age over the prior year. Growth was expected to decline a little over the following two years, much as had been expected three months earlier. In

large part this reflected the expectation that growth in China would gradually ease further.

China:The downside risks to growth in China in the near term had diminished somewhat because conditions in the property market had improved, sup-ported by rapid growth of housing prices and credit, and there had been strong growth in government-funded infrastructure projects.

Developed Economies:In the major advanced economies, growth had continued to be supported by accommodative monetary policy and labour market conditions had im-proved further. Consumption growth had continued to support the recover-ies in the United States and the euro area.

Financial Markets:Market expectations for a rise in the US federal funds rate had increased over the previous month and the minutes from the September meeting of the FOMC had revealed that most members saw the case for a rate increase as having strengthened in the preceding months. Market pricing indicated strong expectations of a rate rise in December.

Share prices for banks in the major share markets of the United States and Europe had outperformed the broader indices over prior months, following some improvement in profit results.

Data are the latest available as at 1 November 2016

2 November 2016SNAPSHOT Australian Economy

Household Saving

8.0Ratio

$1 161Average Weekly Earnings

Average Price of Residential Dwellings

Population 24.1 million

Unemployment Rate

A$1US$0.7653

=

12Employed

3.3%

Economic Growth Inflation

1.3per cent

$623 000

1.4 %

Cash Rate

annual growth

5.6per cent

Industry Share of Outputkey sectors

Manufacturing7%

Retail Trade5%

Construction

9%

Services59%

%

million

www.rba.gov.au@RBAInfo

Cash Rate1.5 %

Mining6%

Data are the latest available as at 1 November 2016

2 November 2016SNAPSHOT Australian Economy

Household Saving

8.0Ratio

$1 161Average Weekly Earnings

Average Price of Residential Dwellings

Population 24.1 million

Unemployment Rate

A$1US$0.7653

=

12Employed

3.3%

Economic Growth Inflation

1.3per cent

$623 000

1.4 %

Cash Rate

annual growth

5.6per cent

Industry Share of Outputkey sectors

Manufacturing7%

Retail Trade5%

Construction

9%

Services59%

%

million

www.rba.gov.au@RBAInfo

Cash Rate1.5 %

Mining6%

Source: Reserve Bank of Australia

Australian Economic Snapshot - RBA

Source: Reserve Bank of Australia November Meeting Minutes

*Approximately

Graph of the MonthAud/USD

Brexit

Trump

The above chart shows there were two major events during 2016 that sig-nificantly impacted the AUD value against the USD to the downside. Firstly, the surprise Brexit vote, and secondly, the election of Trump. However, the rationale for the downward pressure on the AUD was for two separate rea-sons.

Brexit caused a drop in the AUD due to a “flight to safety” as markets reacted to the unexpected approval of the Brexit; the polls showed that the margin was close, however, the act of an exit itself seemed at the time to be an extreme move. As uncertainty is rife, the AUD is generally compressed and funds get reallocated into USD or JPY denominated assets.

Source: IG Markets, markings by Ray White Commercial Analyst

However, the AUD fell after the Trump election not because of market neg-ativity, but because of the positive economic rhetoric from president-elect in explanation of his policies. As a result, inflationary expectations over the next year have increased and there is hope that the stimulus from Trump’s policies will kick-start the real American economy and not merely its financial markets. This gave markets reason to gain confidence in the growth outlook of the American economy. As a result, funds have been reallocated back into USD denominated assets in preparation of stimulus and therefore away from emerging market currencies (yes, including the AUD). Given Trump’s “protectionist” views, it is expected that emerging markets will take a hit from tariffs when exporting to the USA should they be imposed.

Source: IG Markets, markings by Ray White Commercial Analyst.The views of the analyst are not necessarily reflective of the views of RWSP.

Hillary likely

Trump may win

Trump certain

Trump policies

“Over-sold”

ASX 200 CHART FOR NOVEMBERNov 1: 5,278.3Nov 30: 5,444.0 (approximate).

Source:Ray White Commercial Analysis The views of the analyst are not necessarily reflective of the views of RWSP.

INdustrial & Commercial Gold Coast, Southport*Approximately

Gold CoastCommercial Brief

November 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. s only.