Dexus Wholesale Property Fund Returns 9.3 per Cent as Retail Yields Beat Office
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Dexus Wholesale Property Fund delivered a 9.3 per cent total return in the year to 30 June. It beat its benchmark across an A$13 billion commercial portfolio.
That performance was the unlisted vehicle’s strongest in four years. Retail rental growth and income yields outpaced the fund’s office and industrial holdings.
Management resolved a redemption backlog exceeding A$1 billion that had accumulated over the past year. Brad Collier, head of diversified funds at Dexus, told a Sydney industry forum that the fund cleared the queue by selling secondary assets while existing and incoming unitholders bought up liquidity.
Clearance of Redemptions and Yield Performance
Capital returned to the fund once asset valuations stabilized after rapid interest rate adjustments across Asia-Pacific property markets. Steady rental increases and high income yields drove performance. Capitalisation rates did not need to compress.
Sydney premium office space drove much of the return. Assets like Gateway at 1 Macquarie Place held tenant demand as corporate employers paid higher rates for central floorplates to draw staff back into central business districts.
Retail Outpaces Office on Yields and Sales
Shopping centres held by the fund delivered income yields above 6 per cent. By comparison, office and logistics assets yielded below 5 per cent. Annual retail tenant turnover grew 5 per cent across the portfolio, giving the landlord pricing power during lease renewals despite subdued consumer sentiment.
Occupancy across these shopping centres sits above 99 per cent. Collier noted that co-ownership with retail operators like Scentre Group helped maintain tenant retention and rental revenue across major regional destinations.
“They’re seeing returns of 9.3 percent for what is a core portfolio.”
Malls as Residential Development Sites
Large shopping centres with surplus land represent the fund’s primary avenue for value expansion. Dexus is pursuing master-planned rezonings around suburban retail hubs to construct high-density residential towers above and beside existing retail footprints.
Plans at Westfield Warringah Mall in Sydney’s Northern Beaches call for more than 1,500 apartments across six residential towers on the Scentre co-owned site. The project will double the vehicle’s capital commitment to the property over the long term.
“They’re seeing returns of 9.3 percent for what is a core portfolio.”
Institutional landlords across the region are reallocating capital away from standalone department store wings toward housing and health services. This structure generates recurrent residential sales or rental income on owned land. It reduces land acquisition risk while providing built-in foot traffic for ground-floor retailers.
Divergence Across Sydney, Brisbane and Melbourne
Performance continues to diverge across Australia’s eastern seaboard capital cities. Brisbane office assets gained institutional investor support after years of restrained construction kept vacancy low. Meanwhile, Melbourne faces high vacancy, landlord leasing incentives, and Victorian state property surcharges.
The twelve-month campaign of non-core disposals reversed the liquidity freeze that hit unlisted Australian property trusts between 2022 and 2024. That recovery establishes a baseline for institutional capital allocators assessing core real estate entries across Australasia.
Dexus is advancing planning approvals for the six-tower residential precinct at Warringah Mall while monitoring tenant absorption in Melbourne before lifting its office allocation there.
Questions & Answers
Q.How did the fund manage to clear its substantial redemption backlog?
How did the fund manage to clear its substantial redemption backlog?
Management resolved the backlog by selling secondary assets. This was possible as asset valuations stabilised after rapid interest rate adjustments, allowing existing and incoming unitholders to buy up liquidity, restoring capital to the fund.
Q.What specifically contributed to retail outperforming office and logistics assets in terms of income yields?
What specifically contributed to retail outperforming office and logistics assets in terms of income yields?
Shopping centres held by the fund delivered income yields above 6 per cent, while office and logistics assets yielded below 5 per cent. Annual retail tenant turnover grew 5 per cent, giving landlords pricing power during lease renewals.
Q.What is Dexus's strategy for expanding value through its large shopping centres?
What is Dexus's strategy for expanding value through its large shopping centres?
Dexus plans to pursue master-planned rezonings around suburban retail hubs to construct high-density residential towers above and beside existing retail footprints. This creates recurrent residential sales or rental income on owned land.
Q.What differences are noted in the performance of Dexus's assets across Australia's eastern seaboard cities?
What differences are noted in the performance of Dexus's assets across Australia's eastern seaboard cities?
Brisbane office assets gained investor support due to low vacancy from restrained construction. Melbourne, however, faces high vacancy, landlord leasing incentives, and Victorian state property surcharges, affecting office allocation decisions there.
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