Should you buy DEXUS Property Group for a higher income?

The quarterly update from DEXUS Property Group (ASX:DXS) is reinforcing my view that the “confession season” won’t be as bad as some fear. Here’s why.

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The latest quarterly result from DEXUS Property Group (ASX: DXS) makes for anything but exciting reading, but at the very least the update should bring further comfort to equity markets about the health of corporate Australia.

The office and industrial property focused group said it continues to see “positive leasing momentum” in Sydney and Melbourne, with net absorption for east coast CBD office space hitting a four-year high in the three months to end March.

Absorption rate refers to the amount of available office space that is leased out in a specific period and management is confident that the positive trend will continue.

What’s also noteworthy is the drop in incentives that the landlord has to offer to secure tenants. The average incentive dropped to 15.4% in the March quarter, compared with 16.1% in the December quarter.

DEXUS’ positive update gels nicely with Stockland Corporation Ltd’s (ASX: SGP) quarterly results, which also painted an upbeat picture for the retail and building materials sectors.

It will be interesting to see what Scentre Group Ltd (ASX: SCG) reports in its quarterly over the next few weeks. Scentre develops and owns Westfield branded shopping malls in Australia and New Zealand.

Shares in DEXUS are up 0.7% at $7.58 and Scentre is 1.9% higher at $3.82 during lunch time trade, while Stockland gave up early gains to trade flat at $4.51.

Property

While I am pleased to see good results and updates from the sector, I am not a buyer of these investments as I think it’s hard to find value after property stocks outperformed strongly.

The S&P/ASX 200 Australian Real Estate Investment Trust (A-REIT) Index has increased by a quarter of its value over the past year compared with a 7.6% gain by the broader top 200 stock index.

I suspect this gap will close over the next six months.

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Motley Fool contributor Brendon Lau has no position in any stocks mentioned. Follow me on Twitter - https://twitter.com/brenlau The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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