LJ Hooker Commercial

2023 Local market performance and insights MARKET MONITOR TOOWOOMBA

Toowoomba Market Overview The growth of Toowoomba is poised to remain robust over the next 5 to 10 years, primarily driven by significant government investments in the region’s infrastructure projects, expansive residential subdivisions, and a steady rise in population. This growth is further fuelled by a compelling blend of excellent housing options, healthcare facilities, and educational institutions, solidifying Toowoomba’s position as a thriving regional centre. The foundation of Toowoomba’s growth lies in the substantial government spending on infrastructure initiatives. Ongoing projects such as road expansions, public transportation improvements, and the development of modern amenities are set to enhance connectivity, accessibility, and overall urban functionality. This infrastructure development not only stimulates local economic activity but also draws businesses and investors to the CBD, creating a positive cycle of growth. The real estate landscape also plays a pivotal role in Toowoomba’s expansion. Large residential subdivisions are being meticulously planned and executed, providing a diverse range of housing options to cater to different preferences and lifestyles. As the population continues to grow, these developments address the demand for quality housing, attracting families, professionals, and investors alike. The consistent population growth in the region contributes significantly to the CBD’s prosperity. This influx of residents not only fuels consumer demand but also provides a burgeoning workforce for existing and potential businesses. The diversification of the population base ensures a stable economic foundation and creates opportunities for retail, hospitality, and other sectors to thrive. Toowoomba’s appeal is further heightened by its robust healthcare and education sectors. The presence of modern healthcare facilities, medical professionals, and specialized services enhances the quality of life for residents and contributes to the city’s overall attractiveness. In addition, the availability of esteemed educational institutions catering to various levels of learning contributes to a well-rounded and educated workforce, attracting families seeking top-notch educational opportunities. Looking forward, Toowoomba’s growth trajectory over the next 5 to 10 years remains promising due to the convergence of factors such as substantial government investments in infrastructure projects, the development of expansive residential subdivisions, a consistent rise in population, and a strong foundation in housing, healthcare, and education. This multifaceted growth approach positions Toowoomba as a dynamic regional centre that offers a high quality of life, a thriving economy, and a vibrant urban environment. 104 Margaret Street, Toowoomba 2 LJ Hooker Commercial

Sales Leasing FY 2023 OUTLOOK TO JUNE 2024 A Grade Avg Sales Price $/sqm Value Supply Demand Yield Office $4,400 6.75%–7.5% Industrial $1,920 6.0%–7.0% Retail $3,085 7.0%–7.5% Strata Office $3,590 6.75%–7.25% FY 2023 OUTLOOK TO JUNE 2024 A Grade Avg Rent $/sqm Rent Supply Demand Incentives Office $340–$440 Industrial $130–$170 Retail $400–$800 Key Market Indicators 16-20 Project Street, Toowoomba 3 Toowoomba Market Monitor

Macroeconomic Outlook Inflation The June 2023 inflation rate came in at below market expectations, with particular progress made in the slowing rate of goods inflation. Goods inflation dropped from 7.6 per cent over the year to March 2023 to 5.8 per cent over the year to June. Goods inflation is far more responsive to monetary policy changes than services inflation, and this shows that consumers have well and truly responded to the RBA’s tightening measures. Services inflation is still increasing, and at 6.3 per cent over the year to June is the highest rate since the introduction of the GST. Inflation in the services sector was largely driven by steep increases in the cost of insurance and rent. Further increases to the cash rate are going to have limited impact on price growth in these areas, and it is likely that the RBA board will take this into consideration at their meeting in August. Retail Trade Retail Trade fell in June 2023, as consumers showed far less willingness to spend in the mid year sales compared to previous years. In a sign of just how much pressure consumers are under, retail spending fell in every category except food retailing, which only increased by 0.1 per cent in dollar terms. Retail volume figures have been negative now for three consecutive quarters (as at June 2023 qtr). This is the first time this has happened since 2008, indicating that we are already in an unofficial ‘consumer recession’. Business Sentiment Business Sentiment is still showing resilience. NAB’s June Monthly Business Survey showed that Business Conditions were steady over June, and Business Confidence rose slightly. Importantly, Capacity Utilisation fell to its lowest level since April 2022. This is a very good leading indicator of unemployment, and indicates pressure may come off wages growth in the medium term. Interest Rates While the unemployment rate is still lower than what the RBA would like, quarterly inflation data and monthly retail trade showed positive inroads are being made in the fight against inflation. While services inflation is still increasing, the main contributors to this – rents, insurance and utilities – are not at all responsive to increases in the cash rate, and it is unlikely continued inflation in these areas will convince the RBA to increase again. Given capacity utilisation and Job Vacancies are falling, albeit slowly, and consumers and borrowers are showing signs of being under significant financial pressure, it is looking increasingly likely that we are at the peak of the monetary policy tightening cycle. However, the RBA is likely to hold the cash rate at the peak until at least mid 2024, to allow inflation to come down to the 2-3 per cent target range. Impact on Commercial Property Market The subdued economic conditions, particularly in the area of discretionary retail, means that demand for retail property will be subdued as retailers face very difficult trading conditions. The office sector will show more resilience, as business sentiment is still holding up relatively well. The industrial sector will continue to benefit from population growth, and still strong online shopping trends. 4 LJ Hooker Commercial

Demographic Overview Labour Force The Darling Downs Employment Region has recorded very strong employment growth over the year to May 2023. There was an increase in 8,400 working people in the region, or 6.0 per cent over the year. This is well above growth in both Queensland (2.8 per cent) and Australia (3.4 per cent). Darling Downs Queensland Australia Employment May ’23 (000) 147.7 2,851.2 14,011.8 May ’22 (000) 139.3 2,773.8 13,546.2 Change (%) 6.0 2.8 3.4 Unemployment May ’23 (000) 6.4 116.7 515.9 May ’22 (000) 9.1 115.4 551.4 Change (%) -30.1 1.1 -6.4 Unemployment Rate May ’23 (%) 4.1 3.9 3.6 May ’22 (%) 6.1 4.0 3.9 Source: Jobs & Skills Australia, Labour Market Data Dashboard, Darling Downs, May 2023 The unemployment rate in Toowoomba LGA is currently below the long term average of 4.9 per cent. There has been a significant downward trend in the unemployment rate since June 2022, indicating the strength of the local economy over the past year. 322 James Street, Toowoomba 5 Toowoomba Market Monitor

Although the Healthcare & Social Services sector remains the largest employer in the Darling Downs region, there has been a noteworthy shift in the composition of the working population towards the Education & Training industry. One driver behind the recent lift in this industry is the new Qantas Group Pilot Academy at Toowoomba Wellcamp Airport. This training centre has introduced around 200 new job opportunities to the region, significantly bolstering the Education & Training sector. Furthermore, as the mining and Gas industries continue to expand their operations, there has been a substantial uptick in the number of training providers offering programs and courses related to well operations and other critical activities. This surge in training opportunities reflects the growing demand for a highly skilled workforce to support the burgeoning needs of these industries. As a result, the Education & Training sector is playing a pivotal role in equipping individuals with the necessary skills and knowledge to excel in these vital sectors, further contributing to the region’s economic growth and diversification. Source: Jobs & Skills Australia, Small Area Labour Markets, March qtr 2023 Toowoomba LGA, Unemployment Rate 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Toowoomba LGA, Smoothed Unemployment Rate 4.9 4.6 6 LJ Hooker Commercial

Source: Jobs & Skills Australia, Labour Market Data Dashboard, Darling Downs, May 2023 Largest Employing Industries, Darling Downs 10.8% 9.7% 6.8% 12.2% 15.8% 7.6% 10.1% 10.1% 13.5% 14.2% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Manufacturing Retail Trade Education & Training Agriculture, Forestry & Fishing Healthcare & Social Assistance Largest Employing Industries, Darling Downs May '23 May '22 24-26 Water Street, Toowoomba 456 Ruthven Street, Toowoomba 48-60 Russell Street, Toowoomba 7 Toowoomba Market Monitor

Population Growth Forecasts by SA2, Toowoomba Source: Queensland Government Statistician’s Office, 2023 edition There is a notable disparity in the population growth projections within the Toowoomba Statistical Area 4 (SA4). Toowoomba – West, Highfields, and Darling Heights are all poised for long-term growth at a rate exceeding the Queensland average. Given that Toowoomba – West, Highfields, and Darling Heights are expected to experience this sustained growth at a faster pace than the Queensland average, several factors contribute to this anticipated expansion. Firstly, the presence of flat land suitable for both industrial and residential development to the west and north of the city, combined with convenient access to existing infrastructure, plays a pivotal role. Additionally, the region’s appeal is enhanced by its accessibility and the relatively lower costs associated with land and housing, which have attracted various industries. Recent examples include the establishment of the Qantas Flight School and Boeing’s state-of-the-art drone manufacturing facility, both of which are expected to create hundreds of employment opportunities. Furthermore, these areas have emerged as vital hubs for transportation, logistics, and technology, with a particular emphasis on developments centred around the new airport and the Charlton Wellcamp area. The abundance of undeveloped land in these regions further underpins their growth potential. However, a significant challenge looms in ensuring that all levels of government provide the necessary infrastructure to support this burgeoning growth. 2026 2031 2036 2041 2046 Toowoomba 0.9% 1.0% 0.9% 0.8% 0.8% Queensland 1.7% 1.4% 1.3% 1.2% 1.1% Five years to 2026 2031 2036 2041 2046 Cambooya - Wyreema 0.3% 0.5% 0.3% 0.5% 0.2% Darling Heights 1.5% 2.1% 1.9% 1.6% 1.3% Drayton - Harristown 1.0% 1.0% 0.8% 0.7% 0.6% Gatton 1.2% 1.2% 1.2% 1.2% 1.1% Gowrie (Qld) 0.5% 0.9% 0.9% 0.8% 0.8% Highfields 2.0% 2.4% 2.0% 1.5% 1.3% Lockyer Valley - West 0.9% 1.1% 1.1% 1.1% 1.0% Middle Ridge -0.2% -0.3% -0.1% 0.1% 0.2% Newtown (Qld) -0.4% -0.4% -0.2% -0.1% 0.0% North Toowoomba - Harlaxton 0.5% 0.9% 0.9% 0.8% 0.7% Rangeville 0.6% 0.2% 0.2% 0.3% 0.2% Toowoomba - Central -0.3% -0.1% -0.1% 0.0% 0.0% Toowoomba - East 0.4% 0.0% 0.0% 0.1% 0.0% Toowoomba - West 3.0% 2.6% 2.2% 1.8% 1.7% Wilsonton 0.2% -0.4% -0.4% -0.2% -0.1% Toowoomba 0.9% 1.0% 0.9% 0.8% 0.8% Queensland 1.7% 1.4% 1.3% 1.2% 1.1% Five years to 2026 2031 2036 2041 2046 Population Growth 8 LJ Hooker Commercial

Both Darling Downs – East and Toowoomba feature in the Top 5 locations in Queensland for Business Risk. This means that businesses in these areas have some of the lowest failure rates in the State. By July 2024, CreditorWatch Business Risk Index predicts that 5.80 per cent of businesses in Australia will fail (over the year prior). In Darling Downs – East SA3 this rate is predicted to be 4.83 per cent, and in Toowoomba SA3, 5.19 per cent. These are both well below the Australian average. For context, the SA3 in Queensland that is predicted to have the highest number of business failures over the year to July 2024 is Ormeau-Oxenford, at 7.36 per cent. Source: CreditorWatch Business Conditions QLD Ranking Region Failure Rate Last 12 Months Failure Rate Next 12 Months Projected Change Business Risk Index 1 Darling Downs – East 3.85% 4.83% 0.97% 73.8 2 Cairns – South 4.13% 4.88% 0.75% 72.0 3 Townsville 3.53% 4.93% 1.40% 71.1 4 The Gap – Enoggera 4.11% 5.07% 0.96% 67.2 5 Toowoomba 3.83% 5.19% 1.36% 61.7 6 Kenmore – Brookfield – Moggill 4.92% 5.36% 0.44% 54.2 7 Brisbane Inner – West 4.31% 5.38% 1.07% 53.6 8 Rockhampton 4.23% 5.44% 1.20% 50.9 9 Bundaberg 4.14% 5.60% 1.46% 45.2 10 Mackay 4.48% 5.64% 1.16% 44.0 CreditorWatch Business Risk Index by SA3, July 2023, Best Ranked SA3s in Queensland Impact on Commercial Property Market Labour force data tells us that the Toowoomba region is showing good resilience in the face of difficult economic conditions. Four of the top five largest employment industries are non-discretionary activities, and should continue to grow in spite of the overall slowing Australian economy. Overall population growth in Toowoomba will be lower than that of Queensland, however, there are areas of Toowoomba that will see stronger growth than the state overall. Demand for commercial space in good proximity to these areas will see stronger demand going forward. 9 Toowoomba Market Monitor

There are significant major development and investments planned for the Toowoomba region that over the longer term will help to stimulate the commercial property market. One the biggest projects underway is the development of the new Toowoomba Hospital. It was announced in June 2023 that John Holland had been awarded the tender to lead the design stage of the new hospital. The new hospital will provide an additional 118 beds across medical, surgical, maternity, coronary and intensive care units, enhancing access to a range of services for the Darling Downs community. It will also provide emergency department treatment spaces, outpatient consultation rooms and diagnostic rooms as well as medical imaging, pharmacy, and pathology services, administration, education and training facilities for hospital staff. Other major projects in planning or development include: • Heritage Bank Head Office – Providing a minimum of 5,000sqm of office space • NAB Branch – A $10m office build to house NABs Branch and Business Banking Centre. The state of the art 1,200 square metre building will be located on Ruthven Street and will bring together more than 80 personal and business bankers from NAB under the one roof • The Mills Precinct – Mixed use commercial/retail development • The Gasworks – A former industrial site 10,569sqm to be redeveloped for commercial use • 381 Ruthven Street (the ‘Pigott’s Building) – Most likely use is a hotel and conference centre mixed use with ground floor retail • AATLIS Precinct – A 760 hectare master planned industrial precinct • Interlink SQ – A $16.1 million intermodal terminal currently under construction as part of the wider Charlton/Wellcamp Industrial Hub. Development and Investment Activity Future Development Opportunities PROPERTY ADDRESS TYPE LAND AREA CS1 (1-25 Mort Street) LFR/ Bulky Goods/ Service Station 1.98ha 901-902 New England Highway (Habitat) Medical/Childcare (Lot 901) Retail (Lot 902) 2.49ha 10804 Warrego Highway Charlton Retail/Supermarket/Hospitality/Hotel 2.62ha 4-8 Clopton Street, East Toowoomba Residential/Commercial (Mixed Use Zoning) 3,254sqm 12-18 Margaret Street, East Toowoomba Residential/Commercial (Med Density Res Zoning) 1.1ha Lot 12 Robson Hursley Road, Torrington Industrial (Med Impact Industry Zone) 5.883ha The Crossings Residential infill subdivision (500 lots) 55ha Bacon Factory site Retail/Residential/Services 11ha 10 LJ Hooker Commercial

Investment Demand In more recent years, demand for commercial investments is being increasingly driven by investors from Sydney and Melbourne. While locally based families still make up a large portion of demand, interstate buyers are hunting for returns that have become too tight in the major capitals. While there is general acknowledgement amongst buyers that short term demand from commercial tenants may be subdued, most buyers in Toowoomba are looking for a long term hold, and are attracted to the solid investment and regeneration activity that is occurring in the CBD and surrounds. Tenant Demand One area of change that is a direct response to challenging demand conditions is the increase in incentives. Incentives paid to office tenants has increased from around 8–10 per cent pre-Covid, to 15–25 per cent now. This growth is expected to moderate as the supply of new A grade property is absorbed over the next one to two years. Supply Like most markets around the country, supply of new commercial property stock will be low over the next few years, as high construction costs are making many projects unfeasible in the short term. In the industrial sector, developers may be incentivized to speculatively build projects to attract tenants in a market where occupiers are typically looking to move in to a ready made product. Supply and Demand Outlook 53 Margaret Street, Toowoomba 11 Toowoomba Market Monitor

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