Last week, a report from VanEck laid out the case for ASX REITs to resurge in 2026.
The report said office and retail REITs currently offer compelling value.
REIT markets have been under pressure since COVID. However conditions are improving as supply pipelines thin, vacancies stabilise and demand normalises.
With supportive economic conditions, potentially easing long-term yields and valuations still at discounts, the medium-term outlook for REITs is positive, albeit requiring selective positioning.
One such REIT that could be set to grow this year is Dexus Convenience Retail REIT (ASX: DXC).
It is an externally-managed REIT with 91 wholly owned service stations and convenience retail assets. These are largely positioned alongside major roads on the Eastern Australian seaboard.
Its share price is down roughly 3% over the last 12 months.
A new report from Bell Potter has indicated it could be undervalued right now.
Here is what the broker had to say.
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Stability and a strong yield
Bell Potter said the REIT's 1H26 result was broadly in line with expectations, delivering funds from operation(FFO) per share of 10.5c.
Full-year FY26 guidance was reaffirmed at 20.9c FFO and 20.9c DPS.
Net tangible assets increased 4.4% over the half, along with solid rental growth. Portfolio fundamentals remained strong at 99.9% occupancy.
The broker also noted that Dexus Convenience Retail has identified two new undisclosed acquisitions for $35m combined spanning one metro and highway site. Settlement is likely to be towards the end of CY26.
It also said the REIT is differentiated from competitors by the high-quality and long-term tenants that it leases these assets to including Chevron, 7-Eleven, United, Mobil and Ampol.
Buy recommendation in tact
Based on this guidance from Bell Potter, it retained a buy recommendation on this ASX REIT.
However the broker did reduce its price target to $3.25 (previously A$3.45).
The broker still sees upside in tact for this company.
It reinforced that the company delivered a solid result with valuations up 4.4% half-on-half, supported by the commercial service station cycle and expansion into metro/highway assets and fund-through developments, which are improving portfolio quality.
Rising debt costs make new acquisitions less attractive than six months ago, but the stock still trades at a 27% discount to Net Tangible Assets (NTA), indicating attractive relative value.
It closed trading yesterday at $2.80.
Based on the price target of $3.25 from Bell Potter, the broker sees an upside of 16.07%.
