Frasers Property had mixed results in the Australian market over the six months to the end of March, with settlement timings and construction delays hitting residential profit while its industrial and logistics unit benefited from sector tailwinds.
The Singapore property giant reported attributable adjusted profit of $S158.2 million ($164.7 million) which, on a like-for-like basis, was well ahead of last year when results were inflated by a one-off accounting property valuation change.
First-half profits for its Australian residential, retail and office business fell to $S9 million, 62 per cent down over the previous year.
Residential was the hardest hit, falling to a $S5 million loss, a $S14 million turnaround on 2021. Office contributed to an 8 per cent weakening in investment earnings as Frasers sought to reposition its two major holdings, including Rhodes Corporate Park.
Retail also came under pressure due to the impact of COVID-19 lockdowns on trade at relatively immature locations such as Burwood Brickworks Shopping Centre in Melbourne.
In contrast, large-format centres performed much better. Anthony Boyd, chief executive at Frasers Property Australia, said Eastern Creek Quarter Stage Two (ECQ XL) would open in June and was well leased, with only one tenancy remaining.
Overall retail occupancies across Frasers’ Australian retail portfolio fell sharply from 94.5 per cent to 81 per cent.
Mr Boyd said the residential dip – just 370 units were completed and settled compared with 1000 during the previous corresponding period – was temporary and settlement would pick up return to historic averages in the second half of this financial year.
Industrial had a positive half, just. Revenue edged up 1.7 per cent while profit before tax, on a like-for-like basis, increased 2 per cent to S$207 million.
Reini Otter, chief executive of Frasers Property Industrial, said he was happy with revenue growth and that occupancy across its sites had reached 100 per cent in Australia and 98 per cent in Europe.
Rental growth was starting to flow, particularly in western Sydney locations such as Kemps Creek, where it had significant holdings.
“Average fixed rent increases are 3 to 4 per cent, but we’re seeing significant increases in western Sydney of 5 to 7 per cent easily,” he said.
“We are also seeing some pretty good effective rent growth in Melbourne, Brisbane probably less so. Sydney is leading the way, Melbourne’s following and Brisbane is now starting to see some movement.”
He added: “What you’ve got in industrial is a very, very unique market situation where vacancy is historically low, demand is historically high and land supply is insignificant in terms of what the market needs.
“Something has got to give and I think it has to be [higher] rents.”