Knight Frank reveals strong demand for quality office space in Townsville CBD

Despite the challenges facing Townsville’s CBD, vacancies for quality office space are the lowest since the 1990s, driving up rents. Read the latest survey results.

Knight Frank partner and Townsville head of agency Paul Dury says rents are rising in the CBD due to a low vacancy rate for high quality buildings. Picture: Supplied.

The Townsville CBD is experiencing a property renaissance not seen since the 1990s, with a strong occupancy rate for high quality commercial buildings driving up the cost of rents.

According to an office occupancy survey carried out by Knight Frank in December 2024, the vacancy rate for premium and A-grade space in the city was below 4.85 per cent.

This number is as low as any other region or metropolitan location in Australia, with the exception of Hobart.

Of the 80,460 sqm of A-grade and above office space currently available in Townsville, only 3900 sqm sits vacant.

The low vacancy rate sits in stark contrast with the figure recorded in 2019, just prior to the pandemic, when the vacancy rate for the Townsville CBD’s quality commercial spaces had blown out to 17.2 per cent.

The minimal number of vacancies was leading to growth in rents, with premium-grade rentals advancing beyond $750 per sqm more often, and A-grade rentals hovering around $500 per sqm.

Unfortunately, occupancies have not improved significantly for the city’s lower grade buildings, with the survey finding the vacancy rate was still more than 30 per cent for lesser quality assets.

Construction work for an office building is underway on Walker St. Picture: Shae Beplate.

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

Knight Frank Senior Partner Valuation and Advisory Matt Ryan said anecdotally, this was the first time these rents had seen significant growth, and “growth is only just beginning”.

“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,” Mr Ryan said.

“The 76,500sqm 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.

“It is fair to say, occupancies in office, industrial and suburban retail are much stronger than they were pre-Covid. Every city is seeing a flight to quality trend, and Townsville is no different.”

Knight Frank partner and Townsville head of agency Paul Dury says rents are rising in the CBD due to a low vacancy rate for high quality buildings. Picture: Supplied.

He said significantly improved standard of accommodation over the past decade, resulting in new buildings and refurbished established buildings, were attracting potential tenants

Knight Frank Senior Partner Agency Paul Dury was fielding increased interest for tenancies in high-quality CBD buildings including 235 Stanley St and 520 Flinders St.

He said the strong demand for office tenancies matched the trend he was seeing for industrial assets, with the strong demand allowing landlords to engage more with potential tenants, rather than having to provide significant incentives to commence negotiations.

“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 are quite active, as well as tenants delivering major infrastructure projects in the region,” Mr Dury said.

Honeycombes Property Group managing director Peter Honeycombe has delivered Telstra's 'Our Hub' Project for the Townsville CBD. Picture: Supplied.

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

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

Knight Frank credited Townsville City Council’s role in supporting employment generating development by waiving infrastructure charges, and for providing grants for the improved presentation of buildings.

Meanwhile, construction work has completed for Telstra’s $31m state-of-the-art office and warehouse facility on Flinders St, and is underway on Castlerock’s carbon neutral building on Walker St, while further down the road, Suncorp will open a new office hub.

For more information, visit www.knightfrank.com.

Originally published as Knight Frank reveals strong demand for quality office space in Townsville CBD