Dexus defies bearish outlook; strikes city towers leasing deals

Dexus has struck a series of fresh leasing deals and is keeping its distribution in line with last year.

Dexus said it had maintained high occupancy by leasing a total of 141,388sq m across its office and industrial portfolios.

Office tower landlord and funds manager Dexus believes that corporate Australia will accelerate its shift back to work and is holding its distribution steady in the face of gloomy predictions.

Landlords have been sold down on fears that tenants will take less space permanently due to a rise in working from home, which has been forecast to hit the amount of space they require.

But Dexus chief executive Darren Steinberg rejected the notion that offices will see lasting changes and argues that staff also prefer working in offices as concerns about the pandemic fade.

Mr Steinberg said major companies were mindful of the impact of Covid-19 and “continually reviewing” their plans but insisted on the centrality of office-based work in driving economic recovery.

“There is going to be more flexibility but at this point we don’t envisage wholesale changes,” he said. “The office will remain a very relevant part of the modern workplace.”

“The economy will see a recovery and business people are looking through the cycle and preparing their businesses for recovery,” he added.

But the Dexus chief acknowledged that in recessions there was weaker demand for office space and expects a clearer picture to emerge over the next 12-18 months.

The office giant has struck a series of fresh leasing deals and signalled it is looking to shrug off the bearish outlook for city towers and the company already well advanced on selling about $2bn worth of towers, with prices mainly near book value.

Dexus expects a full year distribution per security amount that is consistent with fiscal 2020, which was at 50.3c.

The company issued guidance as a result of the strength of rent collections and further clarity regarding the extensions related to Morrison government’s leasing code. But it is subject to there being no reinstatement of any major lockdowns or unforeseen circumstances.

Dexus said it had maintained high occupancy by leasing a total of 141,388sq m across its office and industrial portfolios. It leased 53,600sq m of office space across 63 transactions in the core portfolio and at development projects.

It also performed well in logistics, leasing 87,788sq m of industrial space across 25 deals.

The company also maintained high rent collections of 94 per cent for the September quarter and completed 180 Flinders Street and 80 Collins Street developments in Melbourne.

The company said it had increased expected trading profits across fiscal 2021 and fiscal 2022 to about $95m before tax after agreeing to sell a property in the Sydney suburb of Gladesville.

Dexus is also expanding its funds unit and has made a play for a major AMP Capital-managed wholesale fund.