The onset of the second wave of covid from March 2021 in India has led to occupiers again becoming cautious and holding back fresh leasing decisions and rationalizing existing office spaces, according to an ICICI Securities report
Embassy Office Parks REIT expects leasing sentiment to remain muted for another 2-3 quarters before picking up sometime in the latter half of 2021-22, with the the second wave of covid-19 cases.
In a report, ICICI Securities said the REIT’s office rental collections were robust, with collections of over 99% in 2020-21 and the REIT portfolio has achieved contracted rental increases of 13% on 8.4 million sq. ft. However, the onset of the second covid wave from March 2021 in India has led to occupiers again becoming cautious and holding back fresh leasing decisions and rationalizing existing office spaces," ICICI Securities said a report on Friday.
As a result, the REIT has additional lease expiries of an estimated 1.9 million sq. ft in 2021-22, of which 0.5 million sq. ft is likely to be renewed with the balance 1.4 million sq. ft at risk of remaining vacant until leasing activity recovers.
Embassy Office Parks REIT on Thursday reported 12% growth in net operating income to Rs2,032 crore in 2021-22, compared with the previous financial year, and distribution of Rs1,836 crore to unit holders in 2021-22.
The REIT saw an uptick in people returning to offices during the March quarter until the second wave led to a disruption again.
Embassy REIT chief executive officer Michael Holland said, "Despite the significant challenges caused by the covid-19 pandemic, Embassy REIT has again performed strongly and delivered on its financial guidance." The second wave headwinds notwithstanding, he said, its global clients and occupiers continue to report strong earnings and hiring growth.
Embassy, which has a 32.3 million sq. ft operating portfolio, is focused on completing the ongoing development of 57 lakh sq. ft of office space across cities.
“…While incremental leasing is yet to pick up until international travel resumes and existing assets see tenant exits, Embassy REIT’s current tenant portfolio, which has about 43% of tenants in the technology domain with even smaller verticals such as financial services and research/consulting consisting of global in-house captives is resilient to near-term weakness," ICICI Securities said in the report.