Townsville’s CBD office market appears to be experiencing the strongest  occupancy levels in Premium and A-grade space since the mid 1990s, leading to growth in A-grade face rents since the same decade, according to Knight Frank. 

Knight Frank’s Office Occupancy survey, conducted in December 2024, found the vacancy rate for  Premium and A-grade space in the city was below 4.85%, which is as low as any other region or  metropolitan location in Australia, except for Hobart, which is lower. 

The vacancy rate means that of the 80,460sq m of A-grade and above office space available in  Townsville, only 3,900sq m is vacant. 

In 2019, immediately prior to the pandemic, the vacancy rate for Premium and A-grade space was  17.2%. 

In lower grade buildings, however, occupancy has not improved significantly, with the Knight Frank  survey indicating the vacancy rate is still more than 30% for lesser quality assets. 

According to Knight Frank research, the minimal vacancy is leading to growth in rents. Premium-grade  rentals are now advancing beyond $750 per square metre more often, and A-grade rentals are at $500  per square metre. 

Incentives for new tenancies in A-grade and Premium space have also reduced from above 35% to between 10% to 20%, with longer lease terms emerging. 

Knight Frank Senior Partner Valuation and Advisory Matt Ryan said the low vacancy rate in  Townsville’s CBD office market had led to rents in Premium and A-grade office assets to rise for the first  time since the 1990s. 

“Anecdotally we can say this is the first time these rents have seen significant growth, and the growth is  only just beginning,” he said. 

“The 76,500 square metres of higher quality buildings now occupied is likely the highest quantum of  occupied office floor area for the CBD we have experienced in Townsville’s history. 

“We monitor occupancies across many sectors in North Queensland, and it gives Knight Frank a great  view about how our cities and regions are performing.  

“It is fair to say, occupancies in office, industrial and suburban retail are much stronger than they were  pre-COVID.

“In Townsville’s CBD there is very strong office occupancy in particular, especially in the highest quality  buildings. 

“Every city is seeing a flight to quality trend, and Townsville is no different.  

“Over the past decade a significantly improved standard of accommodation has emerged in the city’s  CBD, with new buildings and refurbished established buildings, and we are seeing tenants flock to these properties.” 

The Townsville City Council has supported employment generating development in the City Core  through the waiver of infrastructure charges, and this incentive programme has allowed property owners  to benefit from grants to improve the presentation of buildings in recent years. 

Knight Frank Senior Partner Agency Paul Dury said he was fielding increased enquiry for tenancies in high-quality buildings in the Townsville CBD including 235 Stanley Street and 520  Flinders Street. 

“We are receiving much stronger occupancy enquiry for office tenancies, matching the trend in  increasing demand for industrial assets we were already experiencing,” he said. 

“The market doesn’t just rely on government tenants anymore. 

“There are more than 10,000 employees working the Townsville CBD now, and apart from  government, private sector tenants in the Resources and Renewables sectors now also quite active,  as well as tenants crucial in the delivery of major infrastructure projects in the region. 

“The Health and NDIS sectors also continue to compete for vacancies in Townsville’s CBD. 

“We have seen enquiry levels steadily increase over 2024 with the majority coming from retail trade,  education and health, Commonwealth government administration and the construction/manufacturing  sectors. 

“The strong demand is allowing landlords to engage more viably with potential tenants, rather than  have to provide significant incentives just to commence negotiations. 

“This has led to rental growth and lowered incentives.”

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