RESEARCH & FORECAST REPORT

DARWIN COMMERCIAL

H2 2014 | COMMERCIAL

www.colliersnt.com.au

2015: Steady ahead...

MARKET HIGHLIGHTS

• Stable capital values

• Slower volume of sales transactions

• CBD office vacancy rates trend higher

COMMERCIAL MARKET OVERVIEW

By the end of 2014, the Darwin commercial market reflected some cooling conditions

with a lower volume of transactions. Over the six month period from July to December

2014 there were 70 transactions recorded with a total sales value of $97.6 million.

By comparison in the first half of 2014, there were 85 transactions recorded with a

slightly lower total sales value of $95.1 million. The higher sales total was attributed to

several larger industrial sales which helped boost the overall figures.

“ Darwin’s strong construction and resource sector is a

significant contributor to economic activity….”

The majority of sales recorded continued to be of an industrial nature, and comprised

approximately 77% of all sales. This steady flow of industrial sales is clearly reflective of

Darwin’s strong construction and resource sector, which is a significant contributor to

economic activity in the Northern Territory.

Capital values for commercial property in Darwin are expected to remain relatively

unchanged in the first half of 2015. In terms of yields, most transactions have recorded

yields between 7.5% to 10%.

MARKET FORECASTS 6 MONTHS

OVERALL PERFORMANCE

TRANSACTION ACTIVTY

SUPPLY

DEMAND

SENTIMENT

YIELDS

ECONOMIC GROWTH

INFRASTRUCTURE

POPULATION GROWTH

The Darwin CBD and Waterfront Precinct has seen

renewed levels of development activity

SECTOR 6 MONTHS

INDUSTRIAL

DEVELOPMENT

OFFICE

RETAIL

COLLIERS INTERNATIONAL —P. 2

TOP PRICES

In the second half of 2014, the highest commercial sale was

recorded at $10.3 million for an industrial property at 5

Wishart Road, Wishart. The site is one of the larger industrial

sites in Darwin at 3.93 hectares and is currently leased to

Ausfuel who use it for storage, fuel sales and workshop

applications. There is a remaining 12 year lease term on the

site.

The second highest sale recorded was $5.17 million for an

industrial property Berrimah. This site also has a large land

holding of 2.638 hectares and is anticipated to be suitable for

further development after expiry of the current lease term.

ZONING PROPERTY SETTLED

PRICE

Development 5 Wishart Road, Wishart $10.30 m

Light Industrial 13 Beaton Road, Berrimah $5.17 m

Central Business 13 Daly Street, Darwin $4.95 m

Central Business 4 Lindsay Street, Darwin $4.55 m

Central Business 29 Daly Street, Darwin $3.20 m

Service Commercial 474 Stuart Highway, Winnellie $3.00 m

Development 1 Mettam Road, Wishart $2.875 m

Development 81 Syrimi Road, Tivendale $2.45 m

Multiple Dwelling 47 Boulter Road, Berrimah $2.80 m

Medium Density 1 Runge Street, Coconut Grove $2.73 m

TOP SALES

RESEARCH & FORECAST REPORT | H2 2014 | COMMERCIAL | DARWIN

Source: Land Titles Office & Colliers International Research

OFFICE

The commercial office sector recorded slow activity through

the second half of 2014, with 2 transactions recorded.

These transactions totalled $2.775 million and comprised of

one freestanding mixed-use dwelling in a quieter street in

the city and another strata title office tenancy just outside of

the city in Bayview.

There appears to be a growing trend for de-centralisation of

office locations, as many businesses opt for affordable yet

quality buildings that offer more amenities like parking.

Overall, the office sector has experienced both lower levels

of tenant demand and an increase in supply from several

new developments that have recently come on line. This will

potentially lead to flat conditions over the next 6 -12 months,

and it is anticipated that landlords will need to offer more

incentives to remain competitive. Vacancy rates for CBD

office currently remain around 11.5% and this expected to

significantly increase over the next 6-12 month upon

completion of new office developments.

The sale of 5 Wishart Road was the largest transaction recorded in H2 2014.

DEVELOPMENT SITES

There continued to be an increasing number of

development sites sold over the second half of 2014. In

total, there were 12 transactions recorded with a combined

sales value of $31.3 million. These sales reflected sites that

are intended to be developed into large mixed-use and

residential projects. By comparison, in the first half of 2014

there were 6 transactions recorded which totalled $44.2

million in sales value.

COLLIERS INTERNATIONAL — P. 3

STRATA INDUSTRIAL

The sale of strata units typically acts as a strong submarket

within the industrial sector, however in the second half of

2014 strata unit sales showed slower sales activity. In total

there were 21 strata industrial sales which contributed

approximately $6.8 million to the overall value of industrial

sales. By comparison in the first half of 2014, there 54

strata unit sales with a total sales value of approximately

$19 million. It appears that strata units continue to maintain

their popularity with owner-occupiers and investors as an

easy way to break into the market. With abundant supply

and the current low interest rates, purchasing a strata

industrial unit is a feasible option for small businesses.

The majority of strata sales continued to be priced under

$500,000 in the second half of 2014. The highest price

achieved for a strata unit was $805,000 for 2/5 Tivendale

Road Berrimah, which comprised of a larger 728 square

metre holding.

This was followed by a sale of $630,000 for a property at

6/7 Caryota Court, Coconut Grove.

Rates for strata industrial titled property have slowed with

older stock currently achieving between $1500 - $2000 per

square metre and newer stock achieving between $2000 to

$3200 per square metre. Returns are expected to remain

steady over the next 6 months with yields ranging from

7.5% for new stock to 9% for older stock. There is potential

for an oversupply situation to occur in this market as some

larger strata industrial developments are completed in the

first half of 2015.

RESEARCH & FORECAST REPORT | H2 2014| COMMERCIAL | DARWIN

INDUSTRIAL

In what has now become the norm in the commercial

market, the industrial sector achieved the most sales

activity in the second half of 2014. The total sales value of

all industrial property was $62 million and comprised of 54

transactions. By comparison, in the first half of 2014 there

75 industrial transactions with a total sales value of $46.6

million.

As highlighted previously, the two largest industrial sales in

the second half of 2014 were $10.3 million for 5 Wishart

Road and $5.17 million for 13 Beaton Road, Berrimah.

Theses sales are reflective of the on-going steady demand

for well-located industrial properties with strong lease

covenants and large land holdings.

Rental growth for industrial property is anticipated to

remain stable over the next 12 months and yields are

expected to stay in the vicinity of 8% to 10% depending on

the quality, size, lease covenants and location of the

property.

The Gulf Centre on Coonawarra Road offers both corporate and

industrial tenancies

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OUTLOOK

The Reserve Bank of Australia has recently lowered the official cash rate to a new

record low of 2.25%, in line with slower economic conditions and in particular as a

result of the winding back of resource projects. The RBA had maintained a long period

of stability, however given the fall of commodity prices along with lower growth in

demand and significant increase in supply, the rate reduction was deemed necessary

to help boost the economy and achieve balanced growth. Several leading economists,

predict that there may be a second interest rate reduction in the coming months.

According to the Territory Economic Review, in 2013-14 the NT recorded the

strongest economic growth rate of all jurisdictions at 6.5%. The Territory also

continues to benefit from a highly engaged workforce, with the unemployment rate the

lowest of all jurisdictions and reported at 3.6 % in December 2014. This compared to

a 6.2 % unemployment rate nationally.

“The Territory continues to benefit from a highly engaged workforce,

with the unemployment rate the lowest of all jurisdictions ….”

Favorable employment conditions along with a strong public administration and

construction sector, have ensured that there is a steady flow of economic activity. In

particular, private capital expenditure was reported to have increased by 8.0 % to

$11.8 billion, which is the highest level on record. This expenditure included $ 8.6

billion which was spent on a large number of major projects such as the INPEX

Ichthys Project, the expansion of the McArthur Rive zinc-lead mine, the Marine Supply

Base and the Darwin Correctional Precinct. In addition to this, private residential

construction also contributed to the Territory’s economic growth with a record number

of houses and apartment complexes coming on line in Darwin and Palmerston.

The resilience of the Darwin market is likely to be tested in 2015; as buyers are more

likely to have more stock to choose from and as rental levels stabilise. We believe

there is reason to remain cautiously optimistic, however mindful that we are in a small

market where even the slightest variations can be misconstrued as a trend when in

effect we have one of the best economic rankings in Australia. As a result modest

transactional activity in the commercial sector is expected over the next 6 months.

Information Sources:

Easy Access, ABS, Land Titles Office, REINT, NT Treasury, Territory Economic Review, RP Data, Colliers International Research Darwin

RESEARCH & FORECAST REPORT | H2 2014 | COMMERCIAL | DARWIN

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RESEARCHER

Lianna Georges

Research Analyst

EMAIL lianna.georges@colliers.com

Colliers International does not give any warranty in

relation to the accuracy of the information contained

in this report. If you intend to rely upon the

information contained herein, you must take note that

the information, figures and projections have been

provided by various sources and have not been

verified by us. We have no belief one way or the

other in relation to the accuracy of such information,

figures and projections. Colliers International will not

be liable for any loss or damage resulting from any

statement figure, calculation or any other information

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