Better Than Expected: Dexus Property Values Shed $1bn

Dexus’ property portfolio is performing better than experts predicted despite a drop of around $1 billion.

The draft external independent valuation estimated a 6 per cent reduction across 175 of the group’s 182 assets in the past six months including 32 office properties and 143 industrial properties.

In May, Moody’s Investor Service predicted higher interest rates and office vacancies would impact property valuations for end of the financial year reporting.

The estimates included a decline in value of 15 per cent for office, industrial properties down by 5 per cent along with a 5 per cent drop for retail.

Dexus chief executive officer Darren Steinberg said they expected well-located quality assets to continue to outperform secondary assets and locations against an uncertain macroeconomic backdrop

“The value of the office portfolio decreased circa 7.7 per cent on prior book values driven by higher capitalisation rates and discount rates, partially offset by market rental growth,” Steinnberg said. 

“The industrial portfolio decreased by circa 0.2 per cent on prior book values, with strong rental growth largely offsetting the impact of higher capitalisation rates and discount rates.”

The group’s weighted average capitalisation rate also expanded by 32 basis points for office up to 5.21 per cent for office and 31 basis points for industrial to 4.77 per cent for the period to June 30, 2023.

The valuation included the 55 assets within Jandakot Airport Perth purchased in 2021 along with assets held for sale.

Earlier in the week Dexus sold a business park in Melbourne’s south-eastern suburbs for more than $300-million making a 7 per cent premium on the sale.