Herron Todd White Valuers – Month In Review

December 6, 2017

As published by Herron Todd White Valuers

Toowoomba has been fortunate to benefit from major infrastructure projects including the Toowoomba Second Range Crossing, the completion of QIC’s Grand Central Shopping Centre extension and the imminent Inland Rail Project.

As predicted in February, despite these major infrastructure projects, the Toowoomba and surrounding suburbs residential market has continued to remain relatively stable throughout 2017 following a slowing level of sales activity in 2016. This followed the peak experienced throughout 2014 and into mid 2015. Although sales activity has been steady across the board, the market has continued to be multi-speed and property specific. There has been little consistency with variations in sale prices and buyer interest making it difficult to determine well performing suburbs and specific property types.

In 2016, an oversupply of new residential product emerged (particularly units), which led to a slight increase in vacancy rates, a reduction in rental rates and subsequent exit of absentee investors. Sales volumes retracted in an orderly fashion and median prices passed their peak. Throughout 2017 a balance appears to have emerged with vacancy rates continually falling from an average of 3.5% across 2016 to 2.3% as at October 2017. The median house price appears to have plateaued at approximately $370,000 while the unit median price has slowly declined to approximately $305,000.

The infrastructure projects are believed to have assisted in holding vacancy rates low with many employees living in the Toowoomba area during the construction processes.

As mentioned in February, the key development areas for new housing included the suburbs of Glenvale, Cotswold Hills, Torrington, Kleinton, Highfields, Cambooya and Westbrook with a mix of owner-occupier and investor orientated estates under development or planned. Smaller lots than the traditional 600 to 1,000 square metre parcels have also been developed in Toowoomba and the acceptance of this small lot product appears to be growing.

West of Toowoomba, the towns within the Surat Basin have experienced significant decline across the board following the decline of the construction phase of the mining and gas boom. These towns are all either regressing currently or have reverted to levels which are more aligned with their predominantly rural based economies. As such, local employment factors are now contributing to the trends witnessed in each of these towns. Rental rates and sale prices have declined significantly following the oversupply situation, however appear to be stabilising and interest in dwellings is being experienced from owner-occupiers. A significant over supply situation remains in the unit market which continues to place downward pressure on this sector. The Roma market is relatively inactive and downward pressure appears to remain while Dalby is showing good signs of stabilisation with a strong occupancy rate leading to positive movement in rents.

In general there were no surprises in the Toowoomba market and predictions made at the beginning of the year appear to have been relatively accurate. We give our predictions a score of 8 out of 10!

In the commercial market the two major retail developments in Toowoomba in 2017 included the redevelopment of the QIC owned Grand Central Shopping Centre and the construction of a new Bunnings. The $500 million plus redevelopment of Grand Central has predominantly been completed. The redevelopment has seen the centre double in size to approximately 90,000 square metres introducing new discount department stores, supermarkets and approximately 160 speciality stores. The construction of a new Bunnings on the former Toowoomba Foundry site has also recently been completed. This is the second Bunnings in Toowoomba and should have a positive impact on the northern CBD precinct.

The redevelopment of the Shell/Coles Express in Kearneys Spring has now been completed with two additional tenancies including a café with a drive through facility. Construction of a food based retail centre known as The Intersection was also recently completed. Tenants in the centre will include Subway, Café 63, Burger Urge, Baskin-Robbins and Oporto.

Over the past 12 months there has been an increase in leasing activity within other areas of the Toowoomba CBD. The majority of activity has been to cafés, bars and restaurants. Most of these operators are new to Toowoomba, resulting in a significant increase in new options for local diners.

The historically low interest rates have resulted in a strong demand for retail properties by investors, however the lack of supply of quality, fully leased properties has limited the number of investment sales and has resulted in a firming of net yields over the past two years.

Recent retail investment sales in Toowoomba include:

Wyalla Plaza, Taylor Street, Newtown – Semimodern convenience shopping centre and service station with a lettable area of 3,997 square metres. Tenants include Friendly Grocer, Brumbys, Dominos, Malouf Pharmacy, a mix of convenience retailers, Puma Service Station and a large medical centre. Reported passing net yield of circa 7%. Sale price of $14.45 million.

283 Ruthven Street, Harlaxton – Semi-modern retail centre that was leased to Red Rooster and a Foodworks supermarket. WALE of 1.48 years. Sale reflected a net yield of 6.99%. Sale price of $1.8 million.

251 James Street, Toowoomba City – Modern mixed use building with a ground floor retail showroom tenancy of 567 square metres with first floor office tenancy of 541 square metres and basement car park for 41 vehicles. Leased to The Open Range and Neil’s Parts. WALE of 2.84 years. Sale reflected a passing net yield of 7.9% and an analysed net yield of 8.86%. Sale price of $3.1 million.