Strong Office Conditions Buffer Weakening Residential Market: Mirvac


ASX-listed property giant Mirvac has reported solid returns across the group’s office, industrial and retail portfolios amid softening residential markets.

In an update to the ASX, Mirvac chief executive Susan Lloyd-Hurwitz underscored the company's office portfolio, describing it as the growth engine of the business over the next stage of the real estate cycle.

“Strong office market conditions continue to drive income growth,” Lloyd-Hurwitz said.

“This passive, secure and stable income growth ensures that our business has increased resilience and flexibility.”

Mirvac maintained 97.2 per cent occupancy across its office pipeline during the quarter while completing 11,000sq m of leasing activity.

Among its property asset classes, strong-yielding offices have continued to perform for Mirvac, while retail and residential sectors begin to slow nationwide.

Related: Mirvac Sells Out East Melbourne Tower

Susan Lloyd-Hurwitz
Mirvac has re-affirmed operating EPS guidance of between 16.8 to 17.1¢ per share for FY19, representing an increase in earnings of between 2 to 4 per cent.

The group has responded to an increasingly competitive retail landscape by reweighting its portfolio to the best and most resilient urban markets, focusing on centres that are located in densely populated catchments.

Mirvac's impressive retail portfolio retained a 99.2 per cent occupancy over the September quarter.

The company sounded out Sydney and southeast Queensland as retail hotspots where spending is still strong.

Earlier this year, softening residential conditions triggered a 6 per cent fall in net profit for the development giant, with revenue down 7 per cent to $2.8 billion from $3.02 the previous year.

In the first quarter of 2019, Mirvac settled 560 residential sales hitting pre-sales of $2.1 billion, and is on track to settle over 2,500 lots.

Sydney and Melbourne's markets have continued to perform thanks to strong population growth, very low unemployment levels and jobs growth across a number of industries.

“While changes to lending have seen market conditions return to more normalised levels, and as anticipated, sales in some sub-markets are slower, we are still seeing demand for land and medium-density residential product, particularly in Melbourne.”

“This is reflected by strong sales volumes at our masterplanned community releases, such as Olivine and Woodlea.”

Earlier this year, Mirvac established Australia's first partnership with one of China's leading travel agencies, Ctrip, in a bid to strengthen retail performance through new channels.

The partnership provides shopping incentives to Chinese tourists in Sydney who shop at Mirvac's Birkenhead Point outlet centre, in the city's inner west.

Mirvac also announced the formation of the Australian build-to-rent “club”, tapping into the emerging asset class.

Mirvac’s first purpose-built build-to-rent asset in Australia will be Indigo at Mirvac’s Pavilions project at Sydney Olympic Park, billed for completion in 2021.

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