Commercial:

TOOWOOMBA’S industrial property market has benefited from investors capitalising on continued low interest rates, with significant growth in sales activity over the 2017-18 financial year, according to Ray White Commercial research.

TOOWOOMBA’S industrial property market has benefited from investors capitalising on continued low interest rates, with significant growth in sales activity over the 2017-18 financial year, according to Ray White Commercial research.

Ray White Commercial Toowoomba principal Brian Hodges said industrial transactions totalled $47.604 million, which was up 21.41 per cent on the previous financial year and a huge 127.89 per cent increase on the 2015/2016 results.

"These two consecutive years of increase have been heavily driven by both the local and intra/interstate investors seeking affordable investments as an alternative to residential which offer low returns," Mr Hodges said.

"During this time, we have seen a marked improvement in the number of enquiries for assets in the sub $1 million price range with yields consistently falling each year. Sales such as 3-5 Yaldwyn Street, Harristown, which changed hands in March for $1.455 million on a yield of 8.66 per cent, highlights the attractiveness of these affordable leased investments."

Mr Hodges said the most active segment were smaller industrial units, which are popular to both buy and lease among a growing number of small businesses across the region.

"This asset type is also popular with local investors seeking a higher return compared to a traditional residential asset," he said.

"Low cost of financing and uncertainty around residential vacancies has sparked some capital value movement and compression in investment yields over the last 12 months, while investors from outside of the local area (who have their finance in place) continue to move up the risk curve venturing into more non-traditional markets.

"Investment is at an affordable price point, with those assets in the sub $700,000 price range attracting high yields between 7.75 per cent to 11.00 per cent (or below this range for assets with strong lease covenants). This has piqued the interest of private investors, particularly local buyers looking to diversify from their existing residential portfolios earlier this year, however, as finance has tightened we expect investment levels to decline."

Ray White Commercial’s June survey of vacant industrial stock across the Toowoomba region found 159,222 sq m of vacancies across 225 properties (excluding hardstand and land).

Mr Hodges said despite this high result, vacancy levels have reduced 8.15 per cent from 173,357 sq m recorded in October 2017, representing 11 properties being absorbed.

"The bulk of space comes in the smaller size ranges of 0-500 sq m and 501-1,000 sq m, which highlights the increased investment activity by private investors in this space," he said.

This asset type is also popular with local investors seeking a higher return...