Herron Todd White August Market Update

August 4, 2017

As published by Herron Todd White Valuers

Toowoomba industrial rentals in Toowoomba have been relatively static with only modest increases over the past two to three years. Leasing demand however has declined recently which coincides with the decrease in activity within the Surat Basin coal seam gas industry. The number of vacancies has increased over the past twelve months which could result in the tightening of rentals or the introduction of lease incentives.

Industrial rental rates in Toowoomba can vary from $75 to $140 per square metre gross for warehouses and $120 to $200 per square metre gross for the office components. These rates will vary depending on factors such as size, quality of building and inclusion of overhead gantry cranes. The inclusion of additional hardstand yard area could also affect a property’s achievable rental. A standard industrial property in Toowoomba will generally have a site coverage of 25% to 30% with premiums often achieved if the site coverage falls below this rate. Rentals of between $8 and $20 can be achieved for hardstand yards with the variances due to size, location and type of hardstand (gravel, bitumen, concrete etc). The other major factor that will affect rental rates is location. The western suburbs of Wilsonton, Glenvale and Torrington have always been considered more popular industrial precincts with suburbs such as North Toowoomba, Rockville, Harlaxton and Drayton generally considered secondary locations.

Toowoomba investors have generally been attracted to low maintenance properties such as near new 4-bedroom 2-bathroom 2-car houses and 6-bedroom 4-bathroom 2-car duplex pairs. Majority of the investor market at present appears to be non-local investors with most locals purchasing to occupy. The majority of the investor market tends to operate in the sub $400,000 segment for houses and sub $550,000 for duplex pairs. In the current market it’s unknown whether investors are favouring strategies to seek higher yields or focusing on capital gains. With a slow moving market at present, investors are possibly looking to use a mixture of the two strategies. Some of the western suburbs such as Glenvale and Cranley, and nearby neighbouring suburbs including Wyreema and Cambooya have tended to be hot spots for investor activity over the past few years. This is most likely a result of vacant space able to be developed; with other suburbs to capacity and unable to spread.

The investor market has been strong in the Toowoomba area over the past few years with the contributing boost in infrastructure and developments recently completed and still underway. These projects have brought workers to the area requiring accommodation. It could be argued that the high investor activity recently experienced in the Toowoomba area had a negative impact on the region with an apparent oversupply situation, rise in vacancy rates and a reduction in rents. On the other hand, this has also helped bring jobs, housing and affordability. Investor interest in Toowoomba and surrounding areas has significantly slowed in the past two years, resulting in a gradual correction of the market with vacancy rates and rents stabilising. People looking to invest in the Toowoomba area could consider purchasing in older suburbs closer to the CBD, shops and services such as Centenary Heights, Darling Heights, Kearneys Spring, Newtown, North and South Toowoomba. These areas could see higher yields with proximity for convenience and have greater potential for capital growth as these suburbs have nowhere to spread.