Why fund managers say Dexus's AI-driven sell-off has gone too far

Fears that AI job cuts will hollow out office demand have weighed on Dexus, but several fund managers argue the discount to asset value is now too wide.

1 Jun 2026 · 6 min read

Office landlord Dexus has been caught in what several fund managers describe as an overdone sell-off, driven by a combination of rate expectation shifts and fears that AI-related job cuts will hollow out demand for office space. SG Hiscock & Company's April 2026 Article argued the market is pricing in a perfect storm of work-from-home, funds management platform challenges and AI-related job concerns, and that this is overdone given Dexus trades at a significant discount to underlying asset values, long-term history and replacement costs.

AI job cuts collide with a prime office portfolio

Pendal Group's March 2026 Newsletter quantified the AI redundancy trend directly affecting Dexus, noting Atlassian's announcement of job cuts totalling 10% of its global workforce, reportedly around 30% of its Australian staff, adds to a growing wave of redundancies at companies including Wise, Block, Westpac and Telstra that has removed approximately 4,000 high-end white-collar jobs across Australia. The report noted the complication for Dexus specifically: the company is building Atlassian's new 58,000 square metre Sydney office, scheduled for completion in late 2026, which it intends to sell upon completion, even as agents have already been appointed to lease a significant portion of the building.

Presumably Dexus's share price weakness is a result of changed expectations around Australian interest rates or the fears around AI's impact on office occupancy through redundancies. But AI's impact on redundancies cannot only affect Dexus.

— Allan Gray, Quarterly Report, March 2026

Allan Gray's March 2026 Quarterly Report made the contrarian case at length, arguing that if AI-driven job losses were severe enough to hollow out office demand, the same workers would also struggle to service the mortgages that make up a large share of bank lending books, a risk the market was not pricing symmetrically into bank valuations. Ellerston Capital traded the position actively through the volatility, exiting in November 2025 on rate hike concerns, reinstating it in February 2026 after a sharp sell-off, and adding further in March 2026, while Ten Cap ran the opposite view via a short position that contributed positively in March amid weak earnings growth and elevated gearing concerns.

What managers are watching next

The thesis was complicated further in June 2026 when Pendal Group reported the NSW Supreme Court found Dexus had committed a material irremediable breach of its shareholders agreement in its APAC Fund by disclosing confidential information during a sale process, potentially forcing Dexus to sell the 27% stake it manages, reducing assets under management by $4 billion and FY27 funds from operations by 3%. With a buy-back program already underway and Allan Gray's position now making up over 3.5% of its Australian equity strategy, the office sector's fundamentals and the APAC Fund legal outcome are the two threads managers are following most closely.