The Dexus (ASX:DXS) share price is in the green today. Here’s why

The DEXUS Property Group announced an upgrade to its FY21 guidance today. Let’s take a look at how it and other REITs are faring

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The DEXUS Property Group (ASX: DXS) share price is lifting today after the company announced an upgrade to its FY21 guidance. At the time of writing, the Dexus share price is trading 0.87% higher at $10.47.

Dexus is one of Australia’s leading real estate investment trusts (REIT) with a portfolio valued at $36.5 billion. Its diversified portfolio focuses on offices, followed by industrial, retail and healthcare properties.

What’s driving the Dexus share price today?

Dexus announced that its board has upgraded its distribution per security growth to approximately 3% for FY21.

Its previous guidance was to deliver an FY21 full year distribution consistent with FY20 (50.3 cents).

Dexus CEO Darren Steinberg welcomed the improved guidance, saying:

Today’s upgrade is a result of better-than-expected outcomes across the underlying property portfolio, as well as delayed settlements for asset sales and other initiatives across the business.

A mixed recovery for REITs

It’s been a mixed recovery for REITs since COVID-19 significantly impacted the sector last year, with certain portfolios performing better than others. The Dexus share price performance sits somewhere in the middle of the pack, not breaking above pre-COVID highs but not underperforming either.

More broadly speaking, industrial REITs including Goodman Group (ASX: GMG) and Centuria Industrial REIT (ASX: CIP) have been the quickest to recover to pre-COVID levels. This could possibly be driven by blue-chip customers and more in-demand properties in high growth sectors such as data centres and e-commerce.

Here’s how Goodman CEO Greg Goodman described the company’s portfolio:

We have concentrated our portfolio in high barrier to entry markets where land is scarce and use is intensifying. With a focus on long-term customer requirements, we are developing to meet demand in these consumer markets, providing essential real estate infrastructure for our customers

In contrast, office-centric REITs such as GPT Group Ltd (ASX: GPT), Centuria Office REIT (ASX: COF) and Dexus need another 20% to 30% to top pre-COVID highs. These REITs have been able to deliver positive year-to-date gains.

In the case of Dexus, its March quarter update advised a solid occupancy rate of 95.4% and 97.8% respectively for its office and industrial portfolios. This was underpinned by an increase in physical occupancy across CBD office locations and positive economic indicators.

Retail REITs including Vicinity Centres (ASX: VCX) and Scentre Group Ltd (ASX: SCG) have struggled to make headway this year. Commentary from Vicinity Centres March quarterly results could shed further light as to why these REITs are underperforming .

Vicinity CEO Grant Kelley said in response to the company’s results:

After a challenging 12 months, we are seeing signs of recovery, with improved centre visitation and retail sales during the quarter. Whilst overall retailer confidence remains fragile, retailers are increasingly committing to new leases versus previous quarters which is encouraging.

However, as the recent quarter has demonstrated, risks of further disruptions from snap lockdowns remain, while tourism and the timing of office workers returning to CBD offices is uncertain. We are focused on continuing to navigate the risks and uncertainties whilst managing the business for the long term.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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