Dexus Industria REIT Maintains Low Gearing as Cap Rates Expand, Raising Market Risks

Robust Financial Performance Amid Market Stability

Dexus Industria REIT (DXI) has released its half-year results for 2025, showcasing a solid financial footing highlighted by a 5.7% increase in funds from operations (FFO) to 9.1 cents per security. This growth reflects the REIT’s resilient income streams, underpinned by a high occupancy rate of 99.5% and a weighted average lease expiry (WALE) of 5.6 years, which together provide strong income visibility for investors.

Despite a modest expansion in capitalisation rates, the portfolio’s valuation rose by $34 million, driven primarily by rental growth and successful leasing outcomes. The REIT’s net tangible assets (NTA) per security increased by 2.5% to $3.32, signaling enhanced underlying asset value.

Active Asset and Capital Management

DXI’s management continues to execute a disciplined capital strategy, maintaining look-through gearing at 27.7%, comfortably below its 30-40% target range. The REIT refinanced $116 million of debt, preserving an average debt maturity of 3.5 years and securing incremental hedging at attractive rates, which mitigates interest rate risk amid a rising cost of debt environment.

Development remains a key growth driver, with a $269 million pipeline focused on high-quality industrial hubs in Sydney and Perth. Committed projects, including those at ASCEND at Jandakot and Moorebank, are progressing well, with yields on cost exceeding 6.25% and pre-leasing rates above 50%, positioning the REIT for accretive earnings growth.

Leasing Success and Tenant Diversity

The REIT’s leasing activity remains robust, with 30,329 square metres of stabilised leasing completed and re-leasing spreads outperforming valuation assumptions by 12.1%. The tenant base is well diversified across sectors such as wholesale trade, construction, retail, logistics, and manufacturing, with the top 10 tenants accounting for 40% of income, including blue-chip names like WesTrac and Amazon.

Leases are structured with attractive rental escalators, including 57% linked to CPI, providing embedded inflation protection. This structure supports organic income growth, with portfolio like-for-like income rising 4.7% and average rent reviews at 3.7%.

Sustainability and Community Engagement

DXI continues to embed sustainability into its operations, maintaining carbon neutral status across controlled assets and advancing renewable energy initiatives such as rooftop solar installations and waste recycling programs. The REIT’s developments incorporate future-proofed designs with energy-efficient features, aligning with Dexus’s broader sustainability strategy.

These efforts not only reduce environmental impact but also enhance asset desirability and long-term value, reflecting growing tenant and investor demand for sustainable industrial real estate.

Outlook and Strategic Priorities

Looking ahead, Dexus Industria REIT reaffirms its FY25 guidance, targeting FFO growth of 2.3% to 17.8 cents per security and distributions of 16.4 cents per security. The REIT plans to continue its active asset management, development execution, and selective portfolio recycling to enhance quality and returns.

With a strong balance sheet, a high-quality portfolio, and a clear focus on sustainability and tenant engagement, DXI is well positioned to navigate market dynamics and deliver long-term value to security holders.