Centuria Industrial REIT (ASX:CIP) reported a “strong interim result” for the first half of fiscal 2026, supported by leasing momentum, valuation gains, and balance sheet actions that management said reinforced the REIT’s capital position. Presenting the results, Centuria Capital’s Head of Funds Management Jesse Curtis was joined by fund manager Grant Nichols and assistant fund manager Michael Ching.
Leasing activity drives income growth and occupancy
Nichols said CIP completed about 144,000 square meters of leasing during the half, representing roughly 11% of portfolio gross lettable area. That activity delivered average re-leasing spreads of 44% across the active portfolio and lifted occupancy to 95.7%. Management said tenant inquiry has been improving across the portfolio, with inquiry reported across “virtually all” remaining vacant and potential pre-commitment space.
Financial performance and updated guidance
Ching said net property income for the half was AUD 101.2 million, up AUD 5 million versus the prior period, driven by operational performance that translated into like-for-like net operating income growth of 5.1%. Higher average debt costs contributed to an increase in interest expense to AUD 32.2 million, up AUD 4 million, and management forecast an FY2026 average all-in cost of debt of 4.9%.
Management reiterated that CIP upgraded its FY2026 funds from operations (FFO) guidance during the period to AUD 0.182 to AUD 0.185 per unit and reaffirmed distribution guidance of AUD 0.168 per unit. In response to an analyst question on the guidance range, Nichols said the remaining variability is “pretty much” leasing-driven, particularly outcomes for two larger vacancies: Bundamba and remaining space in Fairfield. He also said interest rate sensitivity was modest given hedging, stating that a 50-basis-point increase would impact FY2026 earnings by about 0.1 to 0.2 cents per unit.
Valuations, under-renting, asset sales and buyback
CIP recorded a AUD 75 million like-for-like valuation uplift during the half, with around half the portfolio externally revalued. Ching said the weighted average capitalization rate was broadly stable at 5.81%, marking the fourth consecutive reporting period of valuation growth.
Nichols emphasized what management described as meaningful embedded upside from “under-renting.” Management assessed the portfolio to be about 20% under-rented on average and estimated that about 60% of leases expiring through FY2029 are under-rented, providing an opportunity for future positive reversion. In clarifying this point during Q&A, Nichols said the 20% under-renting estimate is an average across 100% of expiring leases, meaning the under-rented subset would imply a higher uplift. Management also estimated forecast downtime from current vacancy and FY2026 expiries could impede FY2026 FFO by nearly AUD 0.02 per unit, but said improving leasing could reduce that drag in future years.
The REIT continued to divest non-core assets, with Nichols citing around AUD 270 million sold since FY2023 at an average premium to book value of 8%. In the first half, CIP sold 42-? Hope in the Road (as referenced in the call) for a 10% premium to book value. Management contrasted these outcomes with the units’ trading level, which it said was about a 20% discount to NTA.
To address the perceived valuation gap, CIP initiated a AUD 60 million buyback in August and completed AUD 36 million during the half. Nichols said the REIT remained active and would continue to consider the buyback, while also acknowledging that buybacks contributed to a modest gearing increase. When asked about completing the remaining authorization, management estimated finishing the program could raise gearing by about 0.5% and said it had options to manage gearing, including “trickling out” selective asset sales.
Capital management and refinancing
CIP undertook what management described as a significant refinancing program, with AUD 450 million of debt refinanced on improved terms. Management said margins tightened by about 10 to 20 basis points and weighted average debt maturity was extended to about 4 years. In Q&A, Nichols said the refinancing included a mix of 3-, 4-, and 5-year terms and averaged about 120 basis points in margin, compared with roughly 130 to 140 basis points previously.
The REIT also repurchased and reissued exchangeable notes, issuing a new AUD 325 million exchangeable note at a fixed annual coupon of 3.5%, with an initial conversion price of AUD 4, which management said was a premium to current NTA. Post balance date, CIP reduced its overall facility limit by AUD 150 million to maintain AUD 408 million in undrawn debt capacity. Management said about 77% of debt is hedged.
Developments and growing data center exposure
Management reiterated a flexible development approach, emphasizing that pipeline projects are income-producing assets that can be sequenced based on market conditions. CIP has one development under construction at 50-64 Mirage Road, Direk (South Australia), expected to complete in the second half of FY2026. Three additional projects were identified for potential commencement in the next 12 to 24 months, requiring about AUD 130 million of incremental spend, which management said could be funded through limited ongoing non-core asset sales.
In Q&A, Nichols said CIP would seek pre-commitment for a circa 30,000 square meter development at Wetherill Park, while a smaller Coopers Plains project targeting 1,500 to 3,000 square meter tenants would be a spec build. He also pointed to a strategy pivot at 346 Boundary Road, Derrimut, where the site had been earmarked for redevelopment but was instead leased to Tesla on a 10-year term, producing a re-leasing spread exceeding 130% and an AUD 21 million valuation uplift.
Data centers were a recurring theme. Nichols said CIP manages more than AUD 450 million of operating data centers leased to “blue chip” tenants and is assessing power bank and data center development potential across multiple sites, arguing that a lack of power, water, and planning approvals is constraining development supply before 2030. During the half, CIP submitted a development application for a new circa 40-megawatt data center adjacent to the existing Clayton data center site in Victoria, using an underutilized section of land.
Management also outlined two acquisitions to build data center optionality:
- Wellcamp, Queensland: a Tier 3 certified 2.5-megawatt operational data center leased for 15 years, acquired at about a 6% yield.
- Yarraville, Victoria: a 2-hectare low site-cover infill site with a 2-year lease, acquired at an initial yield slightly above 5%.
On the Clayton proposal, Nichols said Telstra’s surrender of space would cause a slight rent reduction that was “not material,” and he indicated Telstra is not expected to be a tenant of the proposed new data center. When asked about monetization and economics, Nichols said the REIT’s near-term focus is on securing planning and utility allocations to create a tangible opportunity, and that data center usage could support land values “anywhere from two to five times,” depending on factors such as power allocation and connectivity.
Looking ahead, management said priorities for the remainder of FY2026 include continuing to lift earnings through leasing and capturing embedded under-renting, progressing development opportunities in constrained infill markets, and maintaining balance sheet capacity. The REIT reaffirmed upgraded FY2026 FFO guidance of AUD 0.182 to AUD 0.185 per unit and distribution guidance of AUD 0.168 per unit.
About Centuria Industrial REIT (ASX:CIP)
CIP is Australia's largest domestic pure play industrial REIT and is included in the S&P/ASX 200 Index. CIP's portfolio of high-quality industrial assets is situated in key metropolitan locations throughout Australia and is underpinned by a quality and diverse tenant base. CIP is overseen by a hands on, active manager and provides investors with income and an opportunity for capital growth from a pure play portfolio of high-quality Australian industrial assets. Centuria Property Funds No.
