The country’s largest office landlord, Dexus, has issued guidance for its 2021 full-year distribution in line with the previous year, an announcement which reassured investors amid the uncertainty stemming from the pandemic.
Dexus stock bounced on the news, closing 18c or 2 per cent higher at $9.28. It expects to deliver distributions per security in line with the 2020 result of 50.3c.
The office market more broadly has come under pressure through the disruption in demand and daily occupancy caused by lockdowns and the slowing economy. Office vacancy rates in the Sydney and Melbourne CBDs are more than double what they were a year ago.
Led by Darren Steinberg, Dexus said it had been able to issue guidance as a result of the strength of rent collections and following further clarity on the commercial code of conduct which governs the granting of rent relief.
“It is encouraging to see the activity across all parts of our business despite the subdued economic conditions,” Mr Steinberg said.
“This activity is testament to the quality of the buildings in our portfolio and our extensive relationships with our existing and prospective customers and third-party capital partners.”
Macquarie analyst Stuart McLean noted that while the distribution guidance growth was effectively flat on the previous year, it was still around 6 per cent ahead of market expectations.
The update was “a positive in context of COVID”, the Macquarie analyst wrote in a note to clients, and especially so given the market consensus on Dexus’ guidance.
“Offsetting this strength, we expect office leasing markets will remain challenging, impacting cashflows via an increase in incentives.”
Macquarie has previously forecast that falling net take-up of office space in the major markets of Sydney and Melbourne is forcing down effective rents and could eventually drive down asset values as well.
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