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The Indian Commercial Real Estate office market saw Q1CY22 (Jan-March 2022) net absorption rise 65% YoY with pre-commitments for larger transaction sizes which augurs well for a recovery in the remainder of CY22E, highlighted domestic brokerage and research firm ICICI Securities.

The brokerage has remained bullish on office asset developers and reiterated its positive stance on DLF, Embassy REIT, Mindspace REIT, Brookfield India REIT and Brigade Enterprises. Key risk to its call is the emergence of further Covid waves and global/domestic inflation related risks.

Sharing its top stock picks, ICICI Securities said it has Buy ratings on DLF, Embassy Office Parks REIT, Pheonix Mills, and Brigade Enterprises. Mindspace Business Parks REIT, and Oberoi Realty get Hold recommendation whereas it has Add stance on Brookfield India REIT, Prestige Estates Projects.

"While the global surge in Omicron cases from December 2021 onwards has temporality delayed the recovery in office leasing by a quarter, we expect this trend to reverse from Q2CY22E (Apr’22 onwards) with the improved pace of vaccinations across India, select corporates recalling employees to offices and gradual pick-up in international travel," the note stated. 

ICICI Securities believes that the Indian office market retains many positives such as Limited number of 8-10 pan-India developers capable of building quality rental assets, India remains one of the more affordable office markets in the world and leads in STEM (Science, Technology, Engineering, Mathematics) talent for technology assignments with 2 mn new graduates annually.

“While the jury is out on the eventual outcome of the back to office plans of various corporates, broad consensus is that 15-20% of employees may permanently Work from Office (WFO), 10-15% of employees may permanently Work from Home (WFH) while balance 60-70% of employees may work under a hybrid model of WFO with WFH," it added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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