Dexus's Office Sell-Off Meets a 'Perfect Storm Is Overdone' Case

Rising rate expectations and AI-linked white-collar job cuts hit the stock hard, but fund managers argue Australia's top office portfolio is trading at too deep a discount.

31 Jul 2026 · 2 min read

Dexus underperformed the broader market by 12.5 percent in a single quarter as rising interest rate expectations and AI-related white-collar job cuts across major employers stoked fears about office demand, before fund managers who view its portfolio as Australia's highest-quality office assets argued the sell-off had priced in a perfect storm that was overdone.

A perfect storm of fears hits office REITs

Pendal Group said the stock fell 4.8 percent on weakness in office REITs tied to AI-related job cuts, after Atlassian announced job cuts totalling 10 percent of its global workforce, adding to a growing trend of redundancies among major employers including Wise, Block, Westpac and Telstra, together accounting for around 4,000 high-end white-collar jobs cut across Australia. Allan Gray said Dexus underperformed the index by 12.5 percent for the quarter, describing a REIT whose assets are predominantly office buildings in prime central business district locations, with the weakness presumably a result of changed expectations around Australian interest rates after the Reserve Bank had previously been expected to cut further. Ten Cap said its Dexus short contributed positively in March, with the stock pressured by weak earnings growth and higher interest rates, alongside elevated gearing, ongoing development commitments and asset valuation risk, particularly as the company seeks to divest assets.

Atlassian announced job cuts totalling 10% of its global workforce, which adds to a growing trend of redundancies among major players like Wise, Block, Westpac and Telstra. Altogether, these moves have resulted in approximately 4,000 high-end white-collar jobs being cut across Australia.

— Pendal Group, Newsletter, March 2026

A quality portfolio priced for the worst-case scenario

SG Hiscock and Company said Dexus owns arguably the highest-quality office portfolio in Australia, alongside a large funds management platform, arguing the market is pricing in a perfect storm combining work-from-home trends, challenges within the funds management platform and AI-related job concerns, a combination it views as overdone, leaving the stock trading at a significant discount to underlying asset values. Allan Gray said it has been patiently adding to companies like Dexus, all sold off as a result of war-related uncertainty or shifting interest rate expectations.

The market is pricing in a perfect storm: work-from-home, challenges with the funds management platform and even artificial intelligence-related job concerns. In our view, this is overdone. At current levels, the stock is trading at a significant discount to underlying asset values.

— SG Hiscock and Company, Article, April 2026

Profit-taking after a strengthened position

Ellerston Capital said it strengthened its Dexus position in March using proceeds from other sales, before describing April activity as relatively subdued, having taken some profits in Dexus after the position's earlier gains.

What fund managers say they are watching next is whether AI-related white-collar job cuts spreading across major employers genuinely dent office demand, delivery of asset divestments to manage elevated gearing, resolution of challenges within the funds management platform, and whether the discount to underlying asset values that SG Hiscock and others see closes.