Corporate overview

With 35 years of expertise in property, investment, development and asset management, we have a proven track record in managing capital and risk to deliver superior risk-adjusted returns for our investors.

We invest only in Australia, and directly own €9.6bn1 of office and industrial properties. We manage a further €9.9bn1 of office, retail, industrial and healthcare properties for third party clients through open-ended unlisted wholesale funds, joint ventures and separate accounts.

The group’s circa €5.7bn development and concept pipeline provides the opportunity for both portfolios to grow and enhance future returns.

We consider sustainability to be an integral part of our business with the objectives of leading cities, future enabled customers, strong communities, thriving people and an enriched environment supporting our overarching goal of sustained value.

Dexus is a Top 50 entity by market capitalisation listed on the Australian Securities Exchange (ASX trading code: DXS).

Investment principles & strategy

Dexus’s strategy is to deliver superior risk-adjusted returns for investors from high quality real estate in Australia’s major cities.

As one of the largest managers of Australian real-estate, our scale supports the generation of investment outperformance, by providing valuable customer insights and the opportunity to invest in people, systems and technologies that enhance our customers’ experience. It also enhances our ability to find the ideal workspace solution for customers and generates cost efficiencies.

Our approach of co-investing balance sheet capital alongside our funds and joint venture partners ensures that Dexus’s primary focus is directed at actively driving real estate performance.

Dexus’s leading capability and demonstrated track record of delivering outperformance through active management of real-estate are some of the reasons we are a trusted manager on behalf of the world’s leading pension funds, sovereign wealth funds and other institutions.

We invest in assets/ markets/ sectors where long-term positive thematics will drive superior income growth and value, notwithstanding inevitable disruptions in the economic cycle.

Key thematics in Australia include investing into CBD office markets which benefit from growth in the service sector and rising urban density which leads to a virtuous cycle of infrastructure investment and employment growth.

Other positive thematics are the ecommerce trend for industrial and the growing and ageing population for healthcare.

Sector forecasts

The Australian economy continues to benefit from leading developed world population growth of 1.6% and a substantial infrastructure pipeline.

While the Australian economy has not experienced a recession in 28 years, growth is currently moderating as the housing market rebalances. However, the medium term outlook should benefit from reductions in official cash rates and fiscal stimulus from tax rebates. Australia’s Q2 2019 GDP growth rate of 1.4% per annum compares well to the growth rate of other developed nations in the OECD.

Business confidence is below average given uncertainty on the US/China trade war, Brexit and a slowing economy in Japan and Europe. However, confidence is likely to benefit as residential prices begin to stabilise.

Financing costs are expected to remain low after two cuts to official interest rates. Ten year government bond yields are forecast to remain below 2% for the next few years, with the wide spread between property yields and government bond yields likely to support demand for investment in the office, industrial and alternative sectors. Further falls in official cash rates are anticipated.

OFFICE: Office markets are well positioned. Sydney and Melbourne office vacancy rates are at historic lows of 4.1% and 3.8% respectively, while Brisbane and Perth are in recovery phase with rising rents and falling vacancy rates. While Sydney and Melbourne office markets are benefitting from strong employment growth, leading indicators such as job advertisements and business confidence have eased. Net absorption is likely to be subdued in FY20 given a lack of available space in Sydney and Melbourne.

Inner city areas and CBDs benefit from faster employment growth than other regions. Over the long-term office buildings in the CBD stand to benefit from a virtuous cycle of employment growth and new infrastructure investment. 

INDUSTRIAL: The industrial sector is in a growth phase. Demand for industrial/logistics stock is running at above average levels given population growth and infrastructure investment combined with investment in supply chains by retailers and suppliers. Additionally, the supply of new stock is constrained by the increasing competition for land use, particularly in the metropolitan areas of Sydney and Melbourne.

Supply chains are becoming more complex as retailers adopt omnichannel business models and seek to deliver merchandise to shops, collection points or direct to consumers’ homes. In many cases the long-term success of retailers will depend on their ability to transition to an effective omni-channel business model. There is a growing emphasis on speed of delivery with consumers expecting two-day, one-day or even same-day delivery. Firms are increasingly valuing proximity to the consumer over distance from supplier to save time and cost. The net result is an increasing focus on inner city and motorway-adjacent sites.

Rents continue to grow, particularly in land constrained areas in Sydney and Melbourne. Conditions in Brisbane are expected to continue to improve in the medium-term as the economy strengthens. 

RETAIL: Australian retail turnover growth remains positive at around 3.0% per annum on a moving annual basis. Retailers are experiencing challenging conditions given subdued sentiment and spending growth, as consumers focus on non-discretionary spending (mainly food and groceries). Discretionary spending is weaker particularly in the department store and household goods categories. Going forward, spending should benefit from the stimulatory effect of recent cuts in bank mortgage rates and Federal tax rebates.

The importance of quality shopping centres is reinforced by a recent survey2 which found that 60% of online sales captured by domestic retailers are by players with an omni-channel (physical) presence. 

HEALTHCARE: The Australian healthcare property sector is substantial and growing, yet has a limited institutional presence. With c.€77bn of assets, the sector is a similar size to the Australian industrial sector.

There are strong demand drivers for the sector. Australia’s ageing demographics, longer life expectancy and population growth will continue to drive demand for healthcare services. Given the non-discretionary nature of healthcare services, the sector is insulated from economic cycles, providing lower return volatility than traditional property sectors.

To meet growing demand, healthcare providers are beginning to move their assets off balance sheet by way of sale and lease back arrangements, to provide funding capacity for expansion.

Dexus continues to see value in Australian healthcare real estate and is committed to increasing its exposure to the sector over the long term.

1 Conversion rate of AUD$1/ €0.6171 as at 28 June 2019, Reserve Bank of Australia
2 ‘Shopping patterns give hope for bricks and mortar’, Australian Financial Review, 11 July 2019 

COMPLIANCE STATEMENT

All information is as at 30 June 2019, unless otherwise stated. This information is issued by Dexus Funds Management Limited, Dexus Wholesale Property Limited and Dexus Wholesale Funds Limited (Dexus).

Information in this profile including, without limitation, any forward looking statements or opinions may be subject to change without notice. To the extent permitted by law, Dexus and its officers, employees and advisers do not make representation or warranty, express or implied, as to the currency, accuracy, reliability or completeness of the information and disclaim all responsibility and liability for it (including, without limitation, liability for negligence). Actual results may differ materially from those predicted or implied by any forward looking statements for a range of reasons outside the control of the relevant parties.

This information is not investment advice and does not take into account the investment objectives, financial situation or particular needs of an investor. It is not an offer of securities or units.

This information is not directed at or intended for any entity (or person) that is located or established in (or a citizen or resident of ) any jurisdiction where its use would be contrary to applicable law or regulation.