Dexus moots new CBD office tower despite remote working trend

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WHILE Australia’s largest office landlord, Dexus does not believe the skies have yet cleared for the office market, it has lodged plans to add nearly 16,000 sqm of space to a Melbourne CBD development.

Dexus revealed in its March quarter update that expiries at 80 Collins Street in Melbourne took its office portfolio occupancy down from 96% by income and by area to 95.4% and 94.8% respectively, while its weighted average lease expiry slipped to 4.1 years.

It secured 44,808 sqm of leases during the period with smaller tenants in Sydney and Melbourne been particularly active.

“Despite this activity Dexus maintains its view that the challenging market conditions will see incentives remain elevated for the near term despite some flat lining being reported in market averages,” it said.

A number of customers were secured during the period “from lower quality buildings located in non-core parts of the Sydney CBD”, suggesting tenants are taking advantage of higher incentives on offer. Average incentives lifted from 22.0% to 24.6% across the Dexus portfolio.

Dexus has lodged a planning amendment for its 60 Collins Street development in Melbourne, on a corner site that it acquired opposite 80 Collins Street. The submission hopes to increase the height of the proposed tower increased by an additional 55 metres, from 23 to 38 levels, with the net lettable area potentially increasing by circa 15,900 sqm. The project was approved by the Victorian government last year to include 35,000 sqm of premium grade office space.

Along with Frasers Property Australia, it also lodged plans with City of Sydney for 130,000 sqm of workspace across two towers at Central Place, rising 35 and 37 levels respectively above the future tech precinct.

Also in Sydney, Dexus secured 10 individual transactions covering 9,656 sqm at the MLC Centre in Sydney, including two 10-year deals.

Across its industrial portfolio, 117,747 sqm was leased across 37 transactions, and industrial portfolio occupancy lifted from 95.5% to 97.8% by income, and from 97.3% to 98.9% by area – much of this was owed to a large amount of previously vacant space at Axxess Corporate Park, including 17,653 sqm taking occupancy from 89% to 98.2%.

Coles was renewed across 42,954 square metres at 12-18 Distribution Drive in Melbourne’s Truganina, and Electrolux committed to 10 years at a 19,960 sqm development at 11-167 Palm Springs Road in Ravenhall.

The group’s development pipeline now stands at $11.5 billion, with $6.1 billion in the Dexus portfolio and $5.4 billion within third party funds.

Dexus completed the development at the North Shore Health Hub in St Leonards, delivering a new healthcare facility for DHPF, and yesterday announced the $138.7 million acquisition of a facility in Melbourne’s Parkville biomedical precinct.