Investors, businesses driving bullish market
Townsville records $450m in non-residential sales from July to May
BUSINESSES seeking premises and near panic-stricken activity from southern investors is driving bullish activity in Townsville’s commercial property market, a report finds.
Providing a half-year review, Herron Todd White Townsville director Jason Searston says they have seen unprecedented activity throughout 2021 and leading up to June.
“We have seen unprecedented activity from small businesses seeking property for owner-occupation and almost near panic-stricken activity from southern investors seeking higher investment yields than what is available in the shark tanks of metropolitan markets,” Mr Searston said.
“Notably, transactions have been underpinned by the low interest rate environment in conjunction with once in a lifetime Covid-19 relief packages including Jobseeker and JobKeeper.”
The report says that the current investor yield spread is from 3.94 per cent to 8.57 per cent.
Total non-residential property sales are about $450m from July 2021 to May 2022 with a large volume being in the sub-$2m price bracket.
Mr Searston says industrial property sales outperformed the balance of the market by compositional volume of 73 per cent of recorded sales.
“The broader outlook for the remainder of the year is towards continued activity although we would anticipate some slowdown, particularly at the lower end of the investor market and the owner-occupier segment, tempered by the expected continued uplift in interest rates throughout the remainder of 2022.”
Mr Searston says the CBD office market is a vastly shallower segment by sale volume although it is a major performer in price point and investor sentiment.
A notable sale in March 2021 was the 12-storey Verde office tower in 445 Flinders St, which transacted at $92.85m, a record for Townsville.
He says the sale demonstrates the metrics of a 7.65year weighted average lease expiry, 12 per cent vacancy, analysed yield of 7.48 per cent and an internal rate of return of 7.24 per cent.
“Compositionally, the nonCBD office market produces a higher number of office sales, predominantly along commercial strip retail development underpinned by owner-occupiers and small scale investors,” he says.
“Broadly speaking, the outlook for the office market for the remainder of 2022 will be towards continued consolidation bolstered by strong economic drivers.” Mr Searston says business confidence had again corrected and was now at a five-year high underpinned by major construction projects, continued development in the resources sector and a boom in residential construction.
“While we do not see a major absorption in available space or significant downward movement on the current vacancy rate, we do predict some tenancy churn with the flight to quality being the major catalyst,” he says.
“The hot-desking movement paved the way for downsizing with reductions in office space being prevalent in the
years that preceded Covid-19.” Mr Searston said the concept lost its way during the pandemic and office configurations reverted to single workstations or reduced staff densities.