Embassy Office Parks REIT expects pause in leasing over next 1-2 quarters

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Published: May 20, 2020 5:15:13 AM

Giving an outlook on demand and supply for office spaces, he said, “While demand is likely to moderate considerably through 2020, we believe that in this environment, Grade-A supply will reduce considerably over the medium term”.

Embassy REIT reported an 8% year-on-year increase in revenue from operations for the three months of January to March 2020 at Rs 543 crore.Embassy REIT reported an 8% year-on-year increase in revenue from operations for the three months of January to March 2020 at Rs 543 crore. (Representative image)

Embassy Office Parks REIT believes there will be a pause in leasing over the next one to two quarters before strategies are made by companies to go forward.

Embassy Office Parks REIT CEO Michael Holland said, “We are in the middle of the storm and it will take about six months for companies to reflect back to see what went well and what did not to formulate their future strategies then. So, there will be a pause in leasing in the next one-two quarters”.

Giving an outlook on demand and supply for office spaces, he said, “While demand is likely to moderate considerably through 2020, we believe that in this environment, Grade-A supply will reduce considerably over the medium term”.

Holland said that with the ongoing challenges posed by Covid-19, he expects a severe reduction in density in the workplace. This de-densification in offices will be offset by more flexible work styles including work from home. “However, workplaces will be venues more than ever to building company culture, to collaboration, training and team work”. Holland said that all this would mean offtake for A grade office spaces going up.

Embassy REIT reported an 8% year-on-year increase in revenue from operations for the three months of January to March 2020 at Rs 543 crore. The REIT’s net operating income witnessed a rise of 10% y-o-y to Rs 462 crore.

Distribution for Q4FY20 stood at about Rs 532 crore or Rs 6.89 per unit, representing near 100% payout ratio. The full year cumulative distribution totals to Rs 1,882 crore or Rs 24.39 per unit representing about 99.8% payout ratio. Since Embassy REIT listed in April 2019, it has delivered a total return of about 25%.
Embassy had an overall occupancy of about 92.8% on the near 26.2 million square feet of operating office portfolio, with same-store occupancy of about 94.5% considering March 2019 as the base year.

It leased 3.89 lakh sq.ft. of new area during the fourth quarter, with full year lease-up of 2.4 million sqft, which is the highest absorption seen by the company in the previous five years.

The company delivered about 1.4 million sq.ft. of new office buildings within existing campuses during the year, and around 62% of these new completions have already been committed for leasing by the occupiers.

According to Holland, global technology spends will continue to grow, particularly digital powered data services, cyber security, among others, to support the new work and life styles. He added that cost pressures on global business may increase offshoring, which will benefit mid-term Indian office demand as was the case during the global financial crisis in 2008-2009.

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