This article is from the Australian Property Journal archive
MAJOR office tower landlord Dexus has seen another $762.4 million wiped off the value of its property portfolio as the workplace valuation reckoning continues.
Dexus had 173 of its 176 assets – comprising 33 office properties and 140 industrial properties – externally valued for the six months to 31st December. The 5.2% fall in value was driven by the office portfolio decreasing 6.0% due to higher capitalisation rates and discount rates, partially offset by market rental growth.
The latest round of valuations follows a $1.184 billion devaluation in the previous six months, which saw Dexus swing to a full-year loss of $752.7 million.
Asset value losses have been seen across the commercial real estate sector in 2023 as rising interest rates have affected yields and the office sector grapples with structural headwinds such as working from home and lumpy return to the workplace, causing uncertainty over office real estate requirements. Office vacancy rates are increasing across the country and in response, rental incentives are also on the rise
The weighted average capitalisation rate (WACR) of the office portfolio expanded by circa 32 basis points from 5.21% to 5.53% over the six months to the end of December.
Dexus has this year sold its 44 Market Street tower in the Sydney CBD at a 17.2% discount to book value, and the 1 Margaret Street tower at a 21% discount to the book value.
“We expect well-located quality assets to continue to outperform non-core locations and secondary assets,” outgoing Dexus CEO Darren Steinberg said in an ASX statement.
The industrial portfolio fared a little better, decreasing by 2.1% on prior book values, with strong rental growth again largely offsetting the impact of higher capitalisation rates and discount rates. Its WACR expanded 42 basis points from 4.76% to 5.18%.
The total portfolio WACR increased by circa 34 basis points from 5.11% to 5.45%.
Dexus will reveal particulars of the revaluation as part of its first-half results, to be released on Wednesday, 14th February. The company has just announced it would promote from within following a global search to replace long-time CEO Steinberg, with Ross Du Vernet to take the top job from March.
