This article is from the Australian Property Journal archive
DESPITE economic headwinds Dexus’ industrial and office portfolios maintained high occupancy rate, with low supply helping push industrial leasing incentives lower.
During the September quarter, 43,787 sqm of office space was leased across 86 transactions, representing an increase in stabilised leasing volumes on each of the prior two quarters. In addition, 998 sqm was leased across three transactions at Dexus’s office developments.
Darren Steinberg, Dexus CEO said leasing conditions showed some signs of improvement during the quarter with flight to quality remaining a key theme.
However average incentives during the quarter were 29.6%, marginally up on the levels experienced on average during FY22 due to leasing at 100 Mount Street in the vacancy-impacted North Sydney market.
Despite this, the office portfolio occupancy by income remained high at 95.6% during the quarter. Steinberg said upcoming expiries remain manageable with 6.7% of the portfolio expiring in FY23 and 8.9% in FY24.
In Sydney, Dexus signed a total of 5,953 sqm across 12 leasing transactions at One Farrer Place, 8,301 sqm at 100 Mount Street in North Sydney, 4,456 sqm across nine transactions at 25 Martin Place, 2,431 sqm at 100 Harris Street in Pyrmont and 2,171 sqm across 9 transactions at Australia Square.
In Melbourne, 2,809 sqm was signed across 10 leasing transactions at Rialto Towers and 3,975 sqm across seven transactions at 385 Bourke Street, 2,152 sqm at the 80 Collins Street North Tower, as well as securing a new customer at 180 Lonsdale Street across 1,787 sqm.
Whilst in Brisbane, 1,975 sqm was signed at Waterfront Place across four transactions and in Perth, Dexus secured two new customers across 2,350 sqm at 58 Mounts Bay Road.
The trust’s industrial portfolio remains the top performer. Average incentives reduced to 9.1%, primarily driven by strong customer take up across both new leases and renewals in Sydney and Melbourne markets which continue to benefit from low supply.
Steinberg said industrial market rent growth remains strong across Dexus’s core markets, and the portfolio is now 4.9% under-rented (from 4.0% under-rented at FY22) driven by continued market rent growth across most markets, particularly in parts of Sydney and Melbourne.
Over the quarter, 127,499 sqm of industrial space was leased across 21 transactions. In addition, 3,000 sqm was leased across three transactions at industrial developments.
Key deals were:
− In New South Wales, secured two new customers across 6,971 sqm at Kings Park Industrial Estate in Marayong, a new customer across 6,765 sqm at 9 Dolerite Way, Greystanes, 3,950 sqm with an existing customer at 48 Egerton Street, Silverwater and a combined 3,499 sqm at The Mill in Alexandria
− In Victoria, secured a total of 53,449 sqm with an existing customer at 11-17 Distribution Drive, Truganina and a new customer at 7-9 Distribution Drive, Truganina
− In Queensland, secured a new customer across 25,804 sqm at 278 Orchard Road, Richlands and 12,104 sqm with an existing customer at 50 and 70 Radius Avenue, Larapinta
− In Perth, secured 8,132 sqm at Jandakot Airport industrial precinct with both existing and new customers
The industrial portfolio occupancy by income reduced marginally to 97.7% primarily due to an expiry at 15-23 Whicker Road, Gillman in South Australia. Excluding business parks, occupancy by income was 99.5%.
“In this challenging environment with rising interest rates and continued economic uncertainty, we continued to deliver on our strategic objectives and are focused on integrating the AMP Capital platform,” he added. “In addition, we made solid progress on the key development projects of Atlassian Central and Central Place Sydney.”
“We remain focused on enhancing the resilience of our portfolio and maintaining high occupancy. Industrial markets remain strong, and we are seeing some signs of improvement in office market leasing conditions.” Steinberg said.
Dexus maintains its guidance to deliver distributions of 50.0 – 51.5 cents per security for the 12 months ended 30 June 2023.
