This article is from the Australian Property Journal archive
THE growing popularity of metropolitan, inner city and regional office buildings amid the shift to hybrid working has propelled Centuria Office REIT (COF) to a 53% year-on-year increase in leasing deals.
In the financial year to date, COF has leased 35,243 sqm of office space in 45 transactions nationwide, of which 79.5% were new leases and the balance renewals. Within the March quarter, 4,301 sqm has been leased across 10 deals.
Grant Nichols, COF fund manager and Centuria head of office, said the REIT’s portfolio continues to benefit from the increased leasing activity evident in many domestic office markets, particularly Brisbane and Perth, which achieved strong net absorption over the last 12 months.
Occupancy across the portfolio has increased to more than 97%, while its Western Australia and Queensland assets are now 99.8% and 97.4% occupied respectively.
COF has limited to no exposure to Sydney’s CBD and Melbourne’s CBD office markets, which have been experiencing the weakest tenant demand nationally.
Major deals in the year to date include Costa Group taking 3,576 sqm for 10 years at 818 Bourke Street in Melbourne’s Docklands, and Warner Bros leasing 2,948 sqm for five years at 203 Pacific Highway in St Leonards on the lower North Shore.
Centuria is nearing completion of its Wyatt Street project in Adelaide, which it bought as a speculative office development. The project has achieved pre-leasing commitments totalling 79% of the net lettable area.
“While recent transactional sales volumes across Australian office markets have reduced, there has been evidence of a bifurcation based on quality, size and leasing risk,” Nichols said.
“Of the recent office transactions, those with significant leasing risk – high vacancy or significant lease expiry risk – demonstrated softer transaction metrics than high-quality, well-leased assets worth less than circa $150 million.”
Increased interest rates remained in-line with assumptions adopted in forming COF’s full year earnings forecasts. It reaffirmed its full-year funds from operations guidance of 15.8c per unit and distribution guidance of 14.1c per unit, representing a FY23 distribution yield of 9.9% based on its current trading price.
