AUSTRALIA’S biggest landlords and developers played down concerns about inflated commercial property valuations at a conference on Tuesday (May 2).

Companies at the Macquarie Australia Conference also acknowledged that economic uncertainty was making investors and renters more cautious.

Commercial real estate prices are a major concern for investors globally, as public markets price the impact of a slowing economy and the growth of remote work, while owners, especially unlisted players, resist major changes.

At the conference, Dexus said market pricing implying a 20 per cent to 25 per cent downgrade in asset values was excessive.

Dexus is Australia’s largest office landlord. Its chief investment officer, Ross Du Vernet, said premium buildings coupled with signs that workers were returning to offices should help protect the portfolio.

“It doesn’t really make a lot of sense,” he added.

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Dexus has two Sydney central business district sites on the auction block. Such listings are widely seen as bellwether transactions for how bad the valuation crunch will be. Du Vernet declined to provide a price guide.

Public investors have shunned Australian real estate investment trusts (Reits). The benchmark S&P/ASX 200 A-Reit index remains 21 per cent off a late-2021 peak; this is despite a rally last month.

High-quality assets as a bulwark against big downgrades was a theme for Russell Proutt, chief financial officer at Charter Hall.

The property development company manages A$88 billion (S$78.8 billion) and splits the bulk of its property portfolio between office and industrial properties.

“We think our valuations should be, not impervious, but relatively stable compared to some of the more significant fluctuations we think you’ll see,” Proutt said.

Although data shows that occupancy rates remain high, questions from the packed audience at the Macquarie Australia Conference included one on how much floor space clients would seek when contracts come up for renewal.

Du Vernet said that question was making large leases harder to lock in years ahead of time.

“There’s still a lot of uncertainty as businesses sort of grapple with their requirements… I think it is going to be different from pre-Covid, customers are going to be much more cautious,” he noted.

For Charter Hall, Proutt said there have been no “massive cutbacks”. REUTERS