Dexus confident that offices are coming back to life

Dexus, the country’s largest office landlord, says that the COVID vaccine is making more people comfortable to come back to the office – and that’s flowing through to a rise in leasing inquiry.

But office market conditions remain challenging and there has been a rise in rental incentives to entice tenants.

Chief executive Darren Steinberg said the $11 billion ASX-listed diversified landlord and funds manager was experiencing an increasing level of inquiry, particularly for smaller tenancies from customers in Sydney and Melbourne, which translated to a higher level of leasing during the quarter.

The $2.5 billion redevelopment by Frasers Property and Dexus is planned to be built next door to Atlassian's proposed headquarters near Central Station in Sydney's CBD.
The $2.5 billion redevelopment by Frasers Property and Dexus is planned to be built next door to Atlassian’s proposed headquarters near Central Station in Sydney’s CBD.Credit:Dexus and Frasers Property

Rent collection was 96 per cent and the group completed 108 leasing transactions across 46,703 square metres in the office portfolio, achieving occupancy of 95.4 per cent. Dexus also lodged plans for development of 130,000 sq m of workspace across two premium office towers at Central Place
Sydney, which is the new tech hub in the city.

“Despite this activity Dexus maintains its view that the challenging market conditions will see incentives remain elevated for the near term despite some flat lining being reported in market averages,” Mr Steinberg said.

For the period, office market incentives rose from about 22 per cent in a rent contract to about 24.6 per cent.

“Dexus’ focus on minimising downtime and maintaining high occupancy is supported by its quality portfolio, with a number of customers secured during the period from lower quality buildings located in non-core parts of the Sydney CBD.”

In coming months Dexus will increase its funds management business after it secured approval for the merger of the Dexus Wholesale Property Fund (DWPF) and AMP Capital Diversified Property Fund (ADPF) which was voted on by the respective unitholder bases.

In Melbourne on Monday, the Dexus Healthcare Property Fund (DHPF) boosted its portfolio to more than $1 billion after it exchanged contracts to acquire two large-scale life science assets in Parkville for $138.7 million.


“We are pleased with the continued momentum across the funds platform, as we progressed initiatives in DWPF, healthcare and our new opportunity fund. Our continued focus on our relationships with third party capital partners will assist with opportunities we have in the pipeline,” Mr Steinberg said.

Speaking at the Macquarie Australia Conference on Tuesday, the Dexus chief investment officer, Ross Du Vernet, added that the group’s logistics business was also very strong with the group renewing the Coles contract in Melbourne across 42,954 sq m at 12-18 Distribution Drive, Truganina, and 19,960 sq m with Electrolux for a 10-year term at 11-167 Palm Springs Road, Ravenhall.

Dexus maintains its guidance of achieving a full year distribution per security amount of 50.3¢ that is consistent with the 2020 year, subject to there being no reinstatement of major lockdowns or unforeseen circumstances.

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