16 August 2017

Commercial Property In Townsville Found Gasping For Owner-Occupiers

Commercial Property Report

Commercial property in Townsville is lingering at the bottom of the property cycle, leading property valuation firm Herron Todd White (HTW) has identified in its August 2017 property market review across the nation, finding Townsville and three other major centres are gasping for demand as owner-occupiers snatch up property discounts.

Of the 30 regions captured in the HTW August 2017 national review, Townsville, Perth, Wide Bay and Adelaide are the only four regions positioned at the bottom of the market.

But is being at the bottom of the market a blessing or curse?

Well, it depends on the whereabouts of the buyers and sellers in the property cycle. For buyers, these conditions could be a blessing because properties are primed for “value” acquisition. For sellers, it could be a blessing also as the slump can be exercised with discipline and prudence in the investor’s’ strategies.

However, in the context of the broader Townsville economy, it demonstrates an outcome of the region suffering from sustained negative growth, as the bottom of the market status has been a sustained petulant condition. It is true, the “slump” phase of the property cycle is usually the longest and Townsville has been lingering in this phase for a few years.

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What are the signs of the slump?

Townsville’s industrial property market is attracting owner-occupiers seeking excellent value under the $1 million price range. The occasional high-end acquisition is occurring also where strong cornerstone leases with banks, government institutions or high-end brands such Harvey Norman, etc. are in place.

Industrial rental prices have continued to decline to reach a point where the struggling market is slowly absorbing available supply. Landlords have offered customers incentives with rent-free periods to secure lease terms, which are settling at around 3 months of free rent.
Warehouse space mainly in the Garbutt area has reached $90 to $110 per square metre, mainly towards the lower end of this price range in the area of Townsville.

While better quality industrial property in Garbutt and Bohle is fetching prices in the middle of the $90-$110 rental price range, properties with larger office and hardstands are achieving up to $140 per square metre.

The industrial market in Townsville is still oversupplied based on current demand. HTW’s property report stated; “Overall rents are flat with the market continuing to exhibit a balance to an oversupply of property available relative to current demand.”

Downward pressure will remain on industrial rental prices until such time the market situation improves.

In terms of the HTW’s indicative property clock, Townsville’s commercial property market is persistently situated in the “bottom of the market” phase. The status of the economy is “flat” and rental vacancy trend is “steady”.

But what are the signs of a recovery?

Three main signs of a property recovery are: sale prices rising, rental prices rising and the time on the market to sell properties reduces. With respect to commercial property, new construction activity can also be an indicator.

The residential market has moved to the recovery phase in the property cycle as a shift has occurred in the sector across houses and units associated with accommodation demand increasing due to employment stimulation from minor and major projects.

Further reading:

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