The commercial property market on the Sunshine Coast is navigating treacherous waters as 2026 unfolds, with office vacancy rates climbing and landlord confidence eroding amid a convergence of economic headwinds that show little sign of abating.
Data from the Sunshine Coast Commercial Property Council indicates that office vacancy in prime precincts—including the Mooloolaba waterfront and central Maroochydore—has reached 14.2 per cent, up from 9.8 per cent just 18 months ago. Average rental yields have compressed to 4.1 per cent, well below the 5.5 per cent threshold that many institutional investors deem viable for new acquisitions.
"We're seeing significant flight to quality," explains one prominent local agent. "Tenants are consolidating into newer, energy-efficient buildings on Aerodrome Road and around the Sunshine Coast Business Park, while older stock on streets like Cotton Tree Avenue languishes half-empty."
The challenges are multifaceted. Interest rates, while marginally softer than their 2024 peaks, remain elevated enough to throttle development finance. Several mixed-use projects planned for the Caloundra South precinct have been shelved or delayed indefinitely. Construction costs—labour, materials, and compliance—continue to outpace rental growth, squeezing project economics.
Simultaneously, hybrid work adoption has fundamentally reshaped tenant demand. A major professional services firm recently vacated 4,000 square metres of space on the Broadwater, consolidating remote and flexible arrangements across just two office hubs. Retail landlords face their own pressures: e-commerce competition and discretionary spending headwinds mean many shopfront operators along First Avenue in Caloundra are negotiating downwards or exiting altogether.
The hospitality and tourism sectors—traditionally reliable commercial tenants—are themselves navigating softer consumer demand, further dampening leasing appetite. Even flagship venues in Hastings Street, Noosa, are reporting reduced foot traffic compared to pre-pandemic norms.
Capital values have softened accordingly. Mid-tier office buildings that might have traded at $8,500 per square metre in 2023 are now achieving $7,100–$7,400, a decline of roughly 15 per cent. Investors are increasingly selective, favoring properties with long-term, creditworthy tenants or development upside.
Local council initiatives—including planning reforms designed to accelerate mixed-use development—offer some optimism. Yet most market participants acknowledge that meaningful recovery in leasing demand and rental growth likely remains 12–18 months away, contingent on broader economic stabilisation and a genuine shift in interest rate trajectories.
For now, patience and selectivity define the commercial property playbook on the Sunshine Coast.
This article was compiled by AI from the sources linked above and screened before publishing. See our editorial standards.
