DemandD supports local growth

HIGH business confidence, sustained activity in the mining sector, infrastructure projects and support service industries have underpinned growth in Townsville, according to Herron Todd White.

In the property consultant’s October Month in Review, the firm says a large portion of sales are in the sub-$2m price bracket supported by owneroccupiers and smaller scale southern investors.

It says continued demand for vacant sites demonstrates strong local and national commitment towards the road transport, logistics and warehousing sectors.

“Smaller scale need for modern industrial built form has triggered both the build to occupy and build to lease options. While showing continued signs of promise, these commitments are not without risk and certainly the continued uplift in construction costs and labour shortages questions the ultimate viability of such proposals,” the firm says.

According to HTW, it is likely that the escalation in construction costs, supply chain issues and potential for extended delivery horizons might delay or inhibit new construction over the short term. It says analysed market yields are broad at 4.79 per cent, for a $28m purpose-built cold store facility with a term of 9.8 years, to 9.28 per cent for a small industrial asset with a high passing rent and looming lease expiry.

Typically, the market is analysing between 6.25 per cent and 8 per cent with modern assets demonstrating optimal cash flow expiries being at the firmer end of the investor yield spread.

Older assets or assets with volatile short term expiries are typically generating yields towards the upper end of the range.

HTW says rentals have remained relatively static with nominal core rental growth plus standard annual increases linked to CPI or fixed between 2 and 4 per cent