Highlights

  • Dexus expects FY27 Earnings to reflect lower trading profits and performance fees, continuing headwinds in some funds, higher finance costs and the practical completion of Atlassian Central.
  • Security-holder distributions are expected to remain in line with FY26's 37.0 cents per security, even as underlying earnings drivers shift.
  • A strategic review of infrastructure funds and mandates transferred through the 2023 Amp Capital transaction is underway, aimed at determining a path forward for investors.
  • Look-through gearing of 33.4% sits within Dexus's 30% to 40% target range and is expected to benefit further from asset sales announced after 30 June 2026.

Dexus (ASX:DXS) is entering FY27 with a more cautious earnings outlook following a FY26 in which statutory NPAT surged to $482.2 million from $136.1 million, driven largely by stabilising Capitalisation rates and Revaluation gains rather than a fundamental shift in the operating environment.

While AFFO of $483.9 million, or 45.0 cents per security, met FY26 guidance and distributions held at 37.0 cents per security, the company's forward guidance flags a number of headwinds that are expected to weigh on FY27 earnings even as distributions are guided to remain steady.

FY27 Guidance Flags Multiple Earnings Headwinds

Dexus's outlook for FY27 explicitly calls out several factors expected to affect earnings: lower trading profits and performance fees, continuing headwinds in some funds, higher finance costs, and the practical completion of Atlassian Central. Together, these factors suggest FY27 AFFO could face pressure even as the FY26 result met its own guidance target.

Despite these headwinds, Dexus expects security-holder distributions to remain in line with the previous year's 37.0 cents per security, indicating the company intends to maintain payout levels even if underlying earnings drivers become less favourable.

Strategic Review Adds a Layer of Uncertainty

A key development shaping Dexus's forward outlook is the strategic review of infrastructure funds and mandates transferred to the group through the 2023 AMP Capital transaction. The company says the review is intended to address issues that have emerged in these funds and determine a path forward for investors -- a process that could have implications for fee income and fund performance in coming periods.

The outcome of this review represents an important watch point for FY27, given that fund-related headwinds are already flagged as a Factor weighing on next year's earnings guidance.

Portfolio Occupancy Provides a Stable Foundation

Dexus's underlying portfolio metrics offer a more stable backdrop to the outlook. Office occupancy stood at 95.7% at the end of FY26, with industrial occupancy at 94.6% and rent collections at 99.7%. The Dexus Wholesale Property Fund recorded its strongest one-year return in almost four years and outperformed its benchmark across all reported periods, while the Dexus Wholesale Shopping Centre Fund outperformed over one-, two-, three-, five- and seven-year periods.

Rising Customer Net Promoter Scores across office, industrial, retail and healthcare sectors suggest tenant and customer relationships remain a supportive element of Dexus's outlook, even as broader fund-level headwinds are expected to affect group earnings.

Capital Recycling and Development Pipeline Support the Outlook

Dexus's capital position adds further support to its FY27 outlook. Look-through gearing of 33.4% remains within the company's 30% to 40% target range, and management expects gearing to benefit further from asset sales announced after 30 June 2026. The group raised $2.0 billion of Equity across funds during FY26, including a $500 million commitment to the Dexus Wholesale Property Fund and more than $1.1 billion of secondary unit transactions, while exchanging or settling approximately $1.9 billion of divestments.

Since FY24, total divestments have reached $2.5 billion, exceeding the group's previously stated $2 billion FY25-FY27 target -- giving Dexus continued flexibility to fund its development pipeline, including a new agreement with Boral for capital-efficient access to a long-dated pipeline of approximately 2.5 million square metres of potential lettable area, subject to rezoning and business-plan approvals.

Conclusion

Dexus's outlook for FY27 reflects a group balancing a strong FY26 result -- delivered guidance, materially higher statutory NPAT and robust portfolio occupancy -- against a more cautious set of forward-looking factors. Lower trading profits and performance fees, continuing fund headwinds, higher finance costs and the completion of Atlassian Central are all flagged as likely to affect FY27 earnings, even as distributions are expected to hold steady at prior-year levels. The progress of the infrastructure funds strategic review, alongside continued capital recycling and development activity, will be key to how Dexus's FY27 performance ultimately compares with its cautious guidance.