Falling market rents have caused Citi to lower office income forecasts. While Sydney and Melbourne entered the pandemic restrictions in a strong position, with rents near historical highs and vacancies at their lows, economic conditions have deteriorated.
The broker believes the pandemic will significantly accelerate the structural tailwinds that have driven the strong performance of industrial property and the increase in e-commerce is likely to be sustained.
Citi currently forecasts office asset values to decline more than -15% while industrial asset values could hold up relatively well.
Dexus Property is downgraded to Neutral from Buy as falling office values are considered a headwind. Target is reduced to $9.44 from $14.47.
Sector: Real Estate.
Target price is $9.44.Current Price is $8.93. Difference: $0.51 – (brackets indicate current price is over target). If DXS meets the Citi target it will return approximately 5% (excluding dividends, fees and charges – negative figures indicate an expected loss).
