Dexus sees strong demand for office towers

Dexus says it will increase its payout to shareholders following strong demand for its CBD office towers, particularly in Melbourne.

The property group on Thursday upgraded its guidance for distribution per security for fiscal 2020, lifting it from around five per cent growth to around 5.5 per cent growth.

Dexus said it made a net profit after tax of $994.2 million in the six months to December 31, up 36.9 per cent from the prior period, primarily due to a revaluation of 109 of its 118 office towers and industrial assets.

Dexus chief executive Darren Steinberg said the company, part of the ASX50 index, was benefiting from strong demand for quality properties in its core markets.

"Urbanisation continues to drive demand for quality space in Australian cities and the growth in pension capital is increasingly chasing the favourable returns that real estate can offer," he said.

Dexus, which also manages $17 billion in funds on behalf of 79 third-party clients, is reporting more interest given the low-interest rate environment, the attractiveness of real assets as an investment class and the growth in pension fund capital.

It achieved record Melbourne rents and set new benchmarks for the city's CBD with the focus on 80 Collins Street, the 35-level office tower it bought last year for $1.5 billion.

Six new tenancies increased the lease space there from 63 per cent to 97 per cent, leaving just one floor available to lease.

The company expects to settle this month the $71.5 million sale of Garmea Court, one of Canberra's most recognisable office buildings, as it focuses on the core markets of Sydney, Melbourne, Brisbane and Perth.

It completed in September the redevelopment of 24-storey 240 St Georges Terrace in Perth, the building formerly known as Woodside Plaza.

Dexus said it had 94.7 per cent occupancy on the building and was achieving a 13.2 per cent internal rate of return.

This year it will finish 180 Flinders Street and 80 Collins Street in Melbourne and 12 Creek Street Street in Brisbane.

Mr Steinberg said he was bullish on the outlook for quality office spaces in Australia.

Vacancy rates in Sydney and Melbourne are below average, meaning the markets are not oversupplied, while the Brisbane and Perth markets are recovering and vacancies are declining.

"While issues such as the Australian bushfires and the coronavirus have increased uncertainty about the short-term economic outlook, there are reasons to be positive about the white-collar industries which underpin office demand," he said.

"Conditions in the technology, finance and business services sectors are much more positive than in many other sectors, and interest rates are expected to remain lower for longer, supporting investment demand for real estate."

At 1325 AEDT, Dexus shares were up 02 per cent to $12.92.

DEXUS HALF-YEAR RESULTS

* Revenue of $583.5 million, up 28.1pct from year ago

* Net profit after tax of $994.2 million, up 36. pct

* Distribution per security of 27 cents, unfranked, unchanged from year ago.

Austrlaian Associated PressBack to Breaking News

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