Dexus (DEXSF), Swiss Prime Site (SWPRF): Prime Office Rents Top Passing

Dexus (DEXSF) and Swiss Prime Site (SWPRF) each told an earnings call in the same 24 hours - Dexus on 19 August 2026, Swiss Prime Site on 20 August 2026 - that market rents in their best-located office buildings now sit above the rents already being paid under existing leases. Re-letting an expiring lease in those buildings adds income instead of subtracting it.

How prime office market rents moving above passing rent changes a landlord's income

An office landlord's income comes from a stack of multi-year leases. The rent a tenant pays today was agreed when that lease was signed, and the industry calls it passing rent. When the lease expires, the space is re-priced at whatever the market will pay. The comparison is made on effective rent - the headline rent minus the rent-free period and fit-out contribution the landlord gives away to sign the deal. For several years market effective rent has been below passing rent, so every expiry cut income and the landlord had to hand over a longer rent-free period to keep the tenant.

In a small set of the best-located buildings that relationship has reversed, and the same expiry now raises income. The push comes from supply: higher construction costs make new prime development uneconomic, and completions across the major CBDs will stay well below long-run averages for an extended period [1]. Neither the supply drought nor the tenant preference for top-grade buildings is specific to one company, which is why landlords holding the same kind of asset should reach the same turn in sequence.

What Dexus and Swiss Prime Site disclosed

Dexus reported effective leasing spreads of negative 8.7% on the deals it did in FY26, against negative 10.2% in FY25, and said that for the first time in a long time it is under-rented on an effective basis in Sydney CBD and Brisbane CBD [2]. Incentives move the same way: the company can drive them down in Sydney prime and Brisbane, while they remain sticky in Melbourne and Perth [3].

Swiss Prime Site describes the same condition from the reversion side. Its reversionary potential - the gap between passing rent and market rent that has not yet been captured - stays at about 10% of rents, because market rents refill the pool as fast as it is captured [4]. Operational vacancy is 3.2%, and after five disposals the portfolio is effectively 100% in the best Swiss locations [5].

Three days earlier, GPT Group (GPTGF) reported 92.1% office occupancy and positive leasing spreads of 4.7% in the same Australian market, and said incentives continue to tighten for high-quality buildings in the strongest precinct [6]. Three companies across two unrelated markets describe one condition: rents on the best buildings are rising, and so far only on the best-located stock.

Where the money moves

Landlords gain on two lines. The expiry that used to cut income now adds to it, and the rent-free periods and fit-out contributions paid to sign a deal fall at the same time. That second item sits in capital expenditure, so free cash flow should improve faster than reported rental income.

Brokers sit on the same transactions. A leasing agency fee is a commission on headline rent multiplied by lease term, so rising headline rents on rising volume raise the fee per square metre, and institutional money returning to the asset class tends to show up first in a broker's capital markets revenue. Dexus said institutional capital interest in office has come back a long way [7], and CBRE reported 19% APAC leasing growth in the second quarter of 2026 with notable strength named in Australia [8].

What the disclosures do not establish

The change is specific to submarket and building quality. Mirvac (MRVGF) said on 18 August 2026 that the Melbourne office market has been slow to recover, in commentary on its 7 Spencer Street building [9], and Dexus itself says incentives are still sticky in Melbourne and Perth [3]. Direction is also not the same as sign: Dexus's group effective spread is still negative 8.7% [2], so the accretion appears in the named submarkets before it appears in group numbers.

The demand explanation is not corroborated. Swiss Prime Site attributes its Zurich pre-letting to global leading AI companies [5], while Dexus said in the same week that its tenants are yet to see AI flow through to a reduction in headcount [10]. That leg rests on one company's disclosure. Two things can be checked at the next results: whether Dexus's effective spread keeps narrowing toward positive, and whether Swiss Prime Site's reversionary pool still sits at 10%.

Companies exposed to the same change

• CBRE: Leasing agency fees are calculated on headline rent times lease term, so rising headline rents on rising volume would lift the fee per square metre; it sits downstream of exactly the transactions where the crossing has occurred, and it has made no disclosure about this crossing.
• JLL: Its capital markets business intermediates the institutional money moving back into prime offices, the same capital partnering Dexus describes, and it has likewise made no disclosure about this crossing.
• Lendlease (LLC.AX): One of Australia's largest office developer-managers, it has not reported this season; the exit price on the Sydney workplace stakes it is recycling and the feasibility of a new CBD tower are both set by the market effective rent that has just crossed [11].

Sources

[1] Drillr · Dexus · 2026-08-19 · earnings call (prepared remarks, office market outlook)

[2] Drillr · Dexus · 2026-08-19 · earnings call (Q&A, office leasing spreads)

"So leasing spreads are improving, especially on an effective basis. And for the first time in a long time, we are now on an effective basis, under-rented in Sydney CBD and in Brisbane CBD. The effective spreads on the deals we did in FY '26 were negative 8.7%. So that's down from 10.2% at '25."

[3] Drillr · Dexus · 2026-08-19 · earnings call (Q&A, leasing incentives and capital expenditure)

[4] Drillr · Swiss Prime Site · 2026-08-20 · earnings call (Q&A, reversionary potential and lease terms)

[5] Drillr · Swiss Prime Site · 2026-08-20 · earnings call (prepared remarks, portfolio and leasing)

[6] Drillr · GPT Group · 2026-08-16 · earnings call (office segment)

[7] Drillr · Dexus · 2026-08-19 · earnings call (Q&A, office capital partnering)

[8] Drillr · CBRE · 2026-07-29 · earnings call (Advisory segment)

[9] Drillr · Mirvac · 2026-08-18 · earnings call (Q&A, 7 Spencer Street)

[10] Drillr · Dexus · 2026-08-19 · earnings call (Q&A, AI and tenant space use)

[11] Drillr · Lendlease · 2026-02-24 · earnings call (HY26, co-investment portfolio and capital recycling)

This is only meant to surface industry changes and companies that may be overlooked - not a stock recommendation.