Company Interview / Office defies doubts as Growthpoint lifts outlook

Growthpoint Properties Australia (ASX: GOZ) has lifted its funds from operations guidance to between 23 and 23.6 cents per share, following improved leasing momentum in the first half and a return to profitability, according to CEO Ross Lees. The real estate group reported a net profit of $62.6 million and is on track for record office leasing, with office occupancy rising from 92% to 94%. Industrial assets also continue to perform strongly, with an occupancy rate of 98%. Lees points to ongoing strength in the logistics portfolio and confirms the company is maintaining its distribution guidance.

Lees says the commonly held view that COVID-19 led to a permanent drop in office demand is overblown, asserting the rise in office vacancy rates has been driven largely by new supply coming online rather than a pullback in demand. He highlights that national occupied office floor space has actually increased since 2020. Barriers to new construction, such as high replacement costs and supply chain challenges, act as significant restraints, while conversions to other uses—including data centres and the living sector—are contributing to future supply reductions.

On interest rates, Lees describes volatility in the forward outlook remains the sector’s key challenge, although Growthpoint’s prudent hedging policy has helped mitigate risk. Future investment focus sits on office, industrial, and retail assets, with a preference for high-quality buildings and further growth expected from the funds management business. Despite share price underperformance, Lees maintains a focus on maximising occupancy and delivering stable, growing income streams to security holders.