We initiate coverage on Dexus Industria REIT (ASX: DXI). The trust owns a portfolio of industrial properties and distributes the rent generated from leasing them to securityholders. Its crown jewel is the Jandakot precinct in Perth, which accounts for a third of the portfolio’s total value.

The bottom line: We assign Dexus Industria no-moat, Low Uncertainty, and Standard Capital Allocation ratings. Our fair value estimate of $3 per security is modestly below the net tangible assets of $3.34 as of June 2025. This is to account for the potential property devaluations.

  • The market is pricing in a bigger discount to NTA for Dexus Industria than is justified. Its asset values have held up relatively well during the most recent interest rate tightening cycle. The portfolio has maintained high occupancy and solid rent growth in recent times.

Big picture: Industrial demand has been red-hot for almost a decade, thanks to blossoming e-commerce, onshoring of supply chains, and population growth. Yet, with supply gradually catching up, market rents are likely to normalize, and vacancies tick up.

  • We assume an average rent growth of 3% per year over the next decade for Dexus Industria, below the mid-single-digit growth seen recently. We expect portfolio occupancy to fall to the mid-90s, versus the five-year historical average of 99%.
  • Dexus Industria is well positioned to pursue growth opportunities, which could provide earnings upside. Its financial strength is in good shape relative to many peers. As of June 2025, it has a modest development pipeline of over $200 million.

Coming up: The REIT is set to report half-year results on Feb. 11, 2026. For fiscal 2026, we forecast funds from operations of 17.3 cents per security, down 5% from last year due to the divestment of Brisbane Technology Park.

  • Forward distributions of 16.6 cents per security represent a solid dividend yield of 6.5% at current prices.

Business strategy and outlook

Dexus Industria REIT was rebranded from APN Industria REIT in 2021, following the acquisition of APN Property Group by Dexus, Dexus Industria’s external manager. Since the rebranding, Dexus Industria has transitioned out of suburban office assets like Rhodes Corporate Park in Sydney and Brisbane Technology Park, and has become a pure-play industrial REIT.

The portfolio’s crown jewel is the Jandakot precinct, which accounts for around one-third of Dexus Industria’s earnings. The precinct, acquired shortly after Dexus’ takeover, is jointly held by Dexus Industria, Dexus, and superannuation giant Cbus Super. In addition to established logistics properties, the Jandakot estate includes developable land and Perth’s general aviation airport. The ownership of the airport generates passive recurring revenue, including ground rent, infrastructure services, apron license, and airside parking, with a fraction of income from landing fees.

As of June 30, 2025, the development pipeline, all within Jandakot, amounted to over AUD 200 million, out of which the REIT has committed to complete AUD 80 million in fiscal 2026-27. For the remaining development opportunities, we assume an average capital spending of roughly AUD 40 million per year through to fiscal 2030. Development risks are moderate. The REIT typically opts for fixed-price contracts to avoid construction cost blowouts. To minimize downtime, Dexus Industria tends to secure tenancy agreements before breaking ground for large-scale sites and only undertakes speculative developments without precommitments with smaller sites.

Industrial demand has been red-hot for almost a decade, thanks to booming e-commerce and population growth. Since covid, Dexus Industria has averaged mid-single-digit rent growth, while maintaining high occupancy. However, with low barriers to entry and the addition of new supply in recent times, the collective returns for industrial landlords is likely to decline. We expect average rent increases of about 3% for Dexus Industria through the cycle, with occupancy rates falling to the mid-90s, below the five-year historical average of 99%.

Bulls say

  • The industrial sector benefits from ongoing growth drivers, such as booming e-commerce, supply chain transformation, and population increases.
  • Low market vacancies across major Australian capital cities underpin industrial rent growth.
  • Dexus Industria’s financial health is in good shape relative to many peers, which gives the REIT the flexibility to pursue growth.

Bears say

  • The industrial sector has been red-hot in recent years, leading to a vast amount of new supply. This could lower the overall return on investment.
  • Competition could increase portfolio vacancies and force Dexus Industria to offer higher lease incentives.
  • External management structure brings fee leakage and conflicts of interest.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

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Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.