Australia’s largest owner of office towers, Dexus, has upgraded its guidance for distributions growth from around 5 per cent to 5.5 per cent, bolstered by demand for quality CBD space and a growing development pipeline in Melbourne, Sydney and Brisbane.
The ASX-listed property giant’s half year results revealed an increase of 8.9 per cent in like-for-like office income growth, along with an $11.2 billion development portfolio which includes a number of “city-defining” office sector projects.
With Melbourne and Sydney office market vacancies at record lows, chief executive Darren Steinberg said the influence of urbanisation is driving ongoing demand for quality space in Australian cities.
“For the first six months of the financial year we have continued to benefit from office occupier and investor demand for quality properties in our core markets, achieving record Melbourne rents and strong asset valuation uplifts,” Steinberg said.
Progress on Dexus’ CBD office development pipeline remains solid, with project costs totalling $7.8 billion across four “super sites”: Sydney’s Central Place ($1.1 billion) and Pitt & Bridge precinct ($3 billion); the $550 million development of adjoining sites at 60 & 52 Collins Street in Melbourne, along with Brisbane’s $2.3 billion Waterfront Precinct.
Chief investment officer, Ross Du Vernet, said that an extensive engagement process with the Queensland government and Brisbane City Council had seen the company reach agreement to move forward with its development scheme for Eagle Street Pier and surrounds at Waterfront Precinct in Brisbane.
“We have significant embedded value in our pipeline from the anticipated development margins and fees associated with key projects in the eastern core CBD markets of Sydney, Melbourne and Brisbane,” Du Vernet said.
Moody’s vice president and senior analyst Saranga Ranasinghe said that the group’s results highlight the strength of Dexus’ diversified portfolio and strong market fundamentals in both Sydney and Melbourne.
“Despite weakness in the broader economy, Dexus benefits from record-low vacancy rates and relative stability in industries such as technology and financial services, underpinning robust demand for office space,” Ranasinghe said.