Valuation Gains for DXC Highlight Risks of Interest Rate Shifts Ahead
Dexus Convenience Retail REIT reports a $14.3 million uplift in portfolio valuation for the first half of 2025, driven by a rare compression in capitalisation rates and strong demand in the fuel and convenience retail sector.
- Portfolio valuation uplift of approximately $14.3 million for H1 2025
- 2.0% increase on book values across 91 assets
- Weighted average capitalisation rate falls nine basis points to 6.32%
- First capitalisation rate compression since 2022
- Final FY25 valuations to be disclosed in August
Portfolio Valuation Update
Dexus Convenience Retail REIT (ASX, DXC) has announced a positive valuation update for its portfolio as of 30 June 2025. The fund’s 91 assets, predominantly service stations and convenience retail outlets along Australia’s eastern seaboard, have collectively seen an estimated net valuation uplift of around $14.3 million. This represents a 2.0% increase on the book values recorded at the end of 2024.
While 53 of the assets were externally valued, the remainder were assessed internally, with the combined valuations reflecting a robust market environment for secure income-generating real estate.
Capitalisation Rate Compression Signals Market Strength
One of the most notable aspects of this update is the compression in the weighted average capitalisation rate across the portfolio, which decreased by nine basis points from 6.41% to 6.32%. This marks the first such compression since 2022, signaling renewed investor confidence and a favorable interest rate environment.
Jason Weate, Fund Manager at DXC, highlighted that this trend reflects the ongoing strength in the fuel and convenience retail transaction market. The sector’s appeal is underpinned by stable, long-term leases and contracted rent increases, which provide income security even amid broader economic uncertainties.
Implications for Investors and Future Outlook
The valuation uplift and capitalisation rate compression together enhance the fund’s net tangible assets, potentially supporting future distributions and investor returns. DXC’s conservative capital management strategy, targeting gearing between 25% and 40%, positions it well to navigate market fluctuations while maintaining financial discipline.
Investors will be keenly awaiting the full FY25 results, scheduled for release on 11 August 2025, which will provide comprehensive details on the portfolio’s performance and financial metrics.
Overall, this update reinforces the resilience of convenience retail assets in Australia’s real estate landscape, particularly those with secure income streams and strong tenant profiles.
Bottom Line?
DXC’s valuation uplift and capitalisation rate compression set the stage for a potentially strong FY25, but investors will watch closely for how these trends evolve.
Questions in the middle?
- Will the capitalisation rate compression continue beyond FY25?
- How will the internally valued assets impact the final portfolio valuation?
- What are the implications for DXC’s distribution guidance and gearing strategy?
