Dexus Plans $1.5bn Office Sell-Off

Dexus has confirmed it is selling five office properties in Sydney and Brisbane in a deal worth more than $1.3 billion.

The company is running a number of on-market sales campaigns, with strong interest from local and offshore groups. Sources confirmed the ASX-listed giant was in due diligence with a number of buyers.

The Sydney properties include 383 Kent Street and 309 Kent Street in the CBD as well as 100 Harris Street in Pyrmont and 130 George Street in Parramatta which are all close to closing, above book value.

Meanwhile in Brisbane it was understood a buyer had been found for the Blue Tower 12 Creek Street within the golden triangle.

It follows a series of transactions in the financial district including 444 Queen Street for $54.4 million and 299 Adelaide Street for $85 million.

Dexus has also been on a spending spree in recent weeks on industrial assets including Perth’s Jandakot airport and surrounding parcels for $1.3 billion.

In the past year the group’s industrial sector returns had outperformed other sectors, returning 26 per cent in unlisted funds compared to 10.6 per cent for office ad 5.6 per cent for retail.

“Despite uncertainty associated with the pandemic, investment demand for office assets kept office valuations relatively firm,” Dexus' noted in its fourth quarter real estate review.

“Short-term growth prospects in the industrial and healthcare sectors are better than for office and retail, where vacancy will take time to absorb.”

Moody’s Investor Service senior analyst Saranga Ranasinghe said A-REITs including Dexus were increasing their portfolio weighting to industrial because of structural changes in demand, but yields remained low.

“Most are increasing investments in industrial properties and completing developments in the office sector,” Ranasinghe said.

“But a combination of debt growth to fund industrial segment acquisitions, low yields of these acquired assets, and lower income in retail and office because of pandemic disruptions will drive weaker credit metrics.”

According to Moody’s workplace flexibility would weigh in on demand and above average incentives would keep rents low in the next 12 months.