Office property heads north

launceston

Demand for quality office buildings in Launceston has increased in the last two years.

Set to benefit from growing tourist demand, Northern Tasmania will continue to grow in economic importance.

The region’s strategic position and ease of access via transport links makes it a logical choice for further investment.

Situated within a two-hour drive from Hobart, Northern Tasmania is a growing economic hub and service centre centred around the main administrative towns of Launceston, Devonport and Burnie.

Home to some of Tasmania’s key tourism assets including the Tamar River wineries, mountain bike trails and the Queen Victoria Museum & Art Gallery, Northern Tasmania has emerged as a tourist centre in its own right, attracting visitors from both domestic and international markets.

Serviced by rail, port and airport infrastructure, which provides direct access to the mainland cities of Sydney and Melbourne amongst others, Northern Tasmania is becoming an increasingly preferred location for agriculture, specialised industry and knowledge-based professionals.

Home to almost 230,000 residents, the area provides a sufficiently large market to support a range of business enterprises that would otherwise be expected to operate from Hobart.

Even in the face of global uncertainty, the Northern Tasmanian economy has enjoyed modest growth with its performance supported by increased industry diversity and solid growth in tourist visitation.

As at June 2016 (latest available data), Northern Tasmania’s economy measured $10.49 billion, up 1.6% per annum over the past three years.

In addition to tourist provisions, Northern Tasmania offers a wide variety of other key services that help support the local economy. Notably, this includes educational and research facilities as part of the University of Tasmania (UTAS) campus in Launceston, which houses some 5000 full- time students, medical and retail services, as well as the more traditional industries of manufacturing and agriculture.

In the office market sector, the number of office-based businesses in the Launceston CBD has increased 4.6% over the past two years, highlighting increased demand for office space.

It has been this growth that has led to improving fundamentals in the office market as additional businesses require space.

Similar to other non-metro markets nationally, investor demand for quality office assets in Launceston has increased over the past two years, albeit with sales volumes restricted by a lack of assets of this type for sale.

A recent office sale in Launceston was the February 2017 sale of Holyman House (52 Brisbane St) for $3 million, which reflects an initial yield of 7.9%; and the ‘City Block’ building for $2.1 million in July 2017 on an initial yield of 9.05%

For retail assets, average retail core market yields in Launceston have firmed by an estimated 20 basis points over the past year and currently range from 6.5% to 7.0% for prime grade stock.

Retail assets with a secure tenant and strong leasing covenants would trade firmer with these metrics.

Given Northern Tasmania’s strategic location as a major service and tourist centre within Tasmania, there exists many opportunities for additional business investment.

Further investment is already happening in the area, underpinned by the recent approval for a new UTAS campus within the Launceston and Burnie city centre and the Launceston ‘City Heart’ and Devonport ‘Living City’ projects.

By Rob Dixon, Kinght Frank Tasmania’s Director of Commercial Sales and Leasing (North)

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