The S&P/ASX 300 Index (ASX: XKO) stock Centuria Office REIT (ASX: COF) has seen its fair share of volatility in the last few years, as the chart below shows. With the RBA in a period of cutting rates and the economic picture improving, it could be a good time to think about this business.
This business says it's Australia's largest ASX-listed pure play office real estate investment trust (REIT), overseen by an active management team with "deep real estate expertise".
Around 75% of its income is derived from government, multinational corporations or listed entities. Another 12% is leased to national tenants. The business can point to a strong, blue-chip tenant base.
There are a few reasons why this could be a good time to invest. Let me explain what's attractive to me.
Image source: Getty Images
Economic conditions are improving
The period of high inflation was tough for the business because there was still a high level of working from home, while high interest rates were a headwind for property valuations and increasing (interest) costs.
However, the worst now appears to be over.
In the second half of FY25, the business reported an $18 million like for like valuation gain. The business also reported that a 4% average increase in market rents was adopted in the valuations over FY25.
Any additional interest rate cuts by the Reserve Bank of Australia (RBA) could be another boost for the valuation of the properties and could make the ASX 300 stock more attractive for income-focused investors.
Plus, the rate cuts can assist profitability by reducing the cost of debt, leading to higher rental profits and potentially larger distributions.
Centuria Office REIT also pointed to a number of growth drivers remaining for the Australian office market's medium-term outlook. It said that current development feasibilities [are] expected to restrict future supply, office withdrawals for conversion are expected to improve vacancy, and population growth and white collar employment growth could demand. Ultimately, there's rental growth potential in supply-constrained markets.
For FY26, it has several goals, including maintaining a high occupancy rate above the national average and maintaining or improving the portfolio's weighted average lease expiry (WALE).
Does the ASX 300 stock have an attractive dividend yield?
While the office property sector is not exactly booming for landlords, it has seemingly stabilised, with some companies mandating workers return to the office more often.
The passive income from the business remains strong for investors. The ASX 300 stock expects to pay a distribution of 10.1 cents per unit in FY26. At the time of writing, that translates into a distribution yield of approximately 8%.
With the Centuria Office REIT unit price trading (at the time of writing) at an approximate 25% discount to the June 2025 net tangible assets (NTA), it could still be an underrated buy with potentially one or more RBA rate cuts expected in the next 12 months.
