High-yielding investment opportunities for industrial properties at an affordable price point are piquing buyers’ interest in Toowoomba as an alternative to residential assets, new research from Ray White Commercial has found.
The smaller industrial unit market priced up to $700,000, attracting yields of 7.75 to 9 per cent, is now the most active segment of the local market in terms of buying and leasing, says Ray White Commercial Head of Research Vanessa Rader.
“This asset type is popular with local investors seeking a higher return compared to a traditional residential asset,” Ms Rader says.
“The low cost of financing and uncertainty around residential vacancies has sparked some capital value movement and compression in investment yields over the last 12 months.
“Many investors from outside of the local area have moved up the risk curve venturing into more non-traditional markets.”
The latest Between the Lines Toowoomba Industrial Market brief shows a high number of industrial vacancies as at October 2017, with 236 assets totalling 173,357sqm of vacant space being actively marketed for lease.
Ray White Toowoomba Commercial Principal Brian Hodges says of these, almost half are in the sub-500sqm range — a total of 31,163sqm — which highlights the increased investment activity by private investors in this space, where the average rent ranges between $85/sqm and $120/sqm.
“Low interest rates have also attracted owner-occupiers to purchase these types of assets rather than rent due to their relative affordability,” Mr Hodges says. “This has limited the pool of tenants for this type of stock.”
Small business registrations have also increased in the Toowoomba region — particularly in the agricultural, forestry, fishing and construction categories — which aligns to the demand for industrial property, he says.
“The future for Toowoomba’s industrial market however continues to be bright, with supply levels for the smaller industrial unit product subsiding with a greater demand-led attitude towards construction across all size ranges,” Mr Hodges says.
Photo caption: The Toowoomba premises of broadacre seed producer and supplier Pacific Seeds.