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Commercial real estate sector was among the of worst sectors due to the pandemic. Heightened preference for remote working at the peak of the coronavirus pandemic, which hit in March last year, has weighed significantly on the outlook for commercial property assets and their rentals. However, with pace of vaccination now improving ana gradual reopening of the economy bodes well for the office leasing space.

It should be noted that multinational companies (MNCs) dominate India’s Grade A office market with contribution of around 80% to the rentals of the Reits of Embassy Office Parks and Mindspace. Reits is short for real estate investment trust.

An analysis of publicly available data for 30 major MNCs operating in India by JM Financial Institutional Securities Ltd showed that most companies are looking at returning to their offices across the world in a phased manner starting 3QFY22 and 4QFY22, and return to office is likely to take place in a hybrid form with working from office on select days and some amount of flexibility built in to work from anywhere.

Data by property consultant JLL India shows that currently, net leasing traction across top seven Indian cities remains slow but is picking up - 3.3 million square feet (msf) in Q1FY21 to 4msf in Q1FY22.

Further, monthly rentals across most Indian micro-markets continue to be attractive. That said, vacancies have risen across the board keeping supply higher than demand and could impact rentals if absorption doesn't improve.

Nonetheless, analysts at JM Financial expect office leasing transactions to pick up in 3QFY22/4QFY22 and gain momentum from thereon.

"Leasing transactions being executed currently have rent free periods of three-six months, implying that rents would start from 4QFY22/1QFY23," said the JM Financial report. "We expect Indian REITs to deliver significantly improved numbers for FY23 and believe they continue to offer attractive total return potential (13-17% by March 22). Most portfolios have already seen major expiries and are unlikely to see significantly more," added the report.

The domestic brokerage house is bullish on Mindspace REIT and Brookfield REIT.

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