Month-In-Review-March-2015

Month in Review
March 2015
rates and we have not seen large declines across the
board.
Some opportunistic tenants have made the most of
the available vacant office supply and have relocated
to more efficient or more modern premises. Some
lessees have downsized their tenancies, to reduce
operating costs during a slow economic period in
Mackay.
Owner-occupiers have also been active in the
market, securing premises at a time of oversupply of
accommodation and a low interest rate environment.
Tenants are now more selective
in choosing tenancies. Good
carparking, efficient floor plates
and well presented buildings
are some of the key drivers for
tenants.
We anticipate that the full impact of the change in
the supply and demand dynamic will be felt in the
market through 2015.
Anecdotal evidence indicates there are still investors
in the market, although purchasers are generally
after the better quality properties or bargain prices.
So overall, 2015 is looking to be another uncertain
year for the office market. Tenants are definitely in
the box seat to negotiate rentals and have a large
amount of space to choose from. There is limited
stimulus which will improve the office market in the
short to medium term and the market is expected
to remain subdued while the coal industry and local
economy are depressed.
Townsville
Over the past 12 months there has been a fair level
of activity, albeit sporadic, within the office market.
This activity has come off a very low base with the
market still positioned at the bottom of the market
cycle.
We have seen a number of sales particularly in
the sub $2 million price bracket both in the CBD
and located along arterial roadways. There have
also been sales in the $5 million to $10 million
price bracket in the CBD along with another iconic
CBD office building which sold in an off market
transaction for $16.6 million.
There seem to be a number of factors playing out in
the local market with buyers looking to capitalise on
vacancies while prices remain subdued, along with
investors, owner occupiers and syndicates snapping
up good assets based on quality and exposure. The
strength of tenants is a factor which needs close
consideration in the current market with
office vacancy rates in the CBD remaining high and
rental rates suffering downward pressure leading
to increasing leasing incentives in order to attract
tenants. There is a concern that current incentives
are simply attracting short term opportunistic
tenants into the market who will have little
commitment to the longer term.
On a positive note, one of the office transactions that
occurred over the past six months was purchased
for an intended alternate use. The Department of
Main Roads building was purchased for a reported
$5 million for a proposed use as a 60 bed mental
health facility. The effect of this alternate use is the
removal of office space that would have otherwise
added to an already oversupplied office rental sector.
Although recent transactions indicate that the
Townsville commercial market is on the national
radar, overall activity is sporadic. We are expecting
the commercial markets to follow the lead of the
capital city markets where improvements are now
underway, but local economic factors continue to
hold back the market.
Cairns
The Cairns office market is relatively shallow with
most properties being tightly held and experiencing
limited sales activity. The market also experiences
limited new development, with the last large office
building constructed in Cairns being the State
Government office tower completed in 2010.
Commercial
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