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The big shift to working from home has failed to dent the results of Australia's largest listed office-focused real estate investment trust.
"Significant" leasing activity and high rent collection across its portfolio has led Centuria Office REIT (ASX: COF) to reinstate its earnings guidance of 19.4c to 19.9c per unit.
This is despite the office market nationally spiking to the highest vacancy levels seen in almost a quarter of a century.
The latest research from the Property Council of Australia shows the national vacancy rate jumped from 9.6 per cent to 11.7 per cent in the six months to the end of January. This is the highest it has been since 1997.
Centuria has managed to avoid the worst of the fallout, benefitting from a diversified national portfolio, with no exposure to Sydney's CBD where domestic tenant demand is weakest.
Highlights for the first half included 31 leasing transactions across 28,306sqm, which accounted for 9.3 per cent of the portfolio's net lettable area. New tenants accounted for more than 10,790sqm of that figure across 17 separate deals.
Even with COVID-19 impacting operations, Centuria reported 96.7 per cent average rental collection.
Although the group has significant exposure to large corporations and government tenants, Centuria says no single tenancy represents more than 7 per cent of portfolio income.
Grant Nichols, fund manager at Centuria, says the interim result reflects the group's capacity to capitalise on moves by businesses to decentralise their workforce.
"While working from home is still topical, we understand many workers want to be back in an office environment but not endure time-consuming daily commutes, which compromise their work-life balance," Nichols says.
"Equally, many businesses, especially those affected by the pandemic, are conscious of cashflow and are actively seeking more affordable rents.
"These complementing themes highlight the desirability of decentralised office markets and support COF's robust half-year performance, evidenced by its significant leasing activity and continuously strong rent collection."
Centuria has reaffirmed its full-year distribution guidance of 16.5 cents per unit, reflecting a yield of about 8.5 per cent based on the current price of securities.
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