Momentum build-up seen in small, mid-size office leasing, large deals from H2FY24 onwards, says Embassy REIT CEO

Embassy Office Parks REIT, Asia’s largest real estate investment trust, has seen momentum build-up for small to mid-size office space leasing deals, in the range of 40,000 -50,000 sq ft, while large deals – of around 250,000 sq ft plus – is expected to accelerate from the second half of FY24, that is post September this year.

According to Vikaash Khdloya, outgoing CEO, Embassy REIT inked 100 deals in FY23, one of the highest in seven-odd years, “despite global macro-economic volatilities” and achieved 51 lakh sq ft of space leasing – higher than its announced guidance of this fiscal of 50 lakh sq ft.

The REIT has not announced any annual leasing guidance for the current fiscal.

While discussions and RFPs (request for proposals) for large deals continue to happen, global majors are reportedly taking time on commitments for the time being because of global uncertainties. Most of the deals are expected to materialise September onwards.

“The momentum build-up for office lease space continues, especially in the small- and mid-size deals. There is offshoring demand for the Indian market from global captives like BFSI (banking, financial services and insurance), tech and product companies, retail and health care. Large deals are expected September onwards. Although RPFs are active, signings will accelerate Q3FY24 onwards,” Khdloya told businessline.

Capital and financial markets remain volatile especially with interest rates moving up.

For FY23, Embassy REIT reported a 15 per cent YoY increase in revenue of operations to ₹3,420 crore, while NOI (net operating income) grew 11 per cent to ₹2,766.3 crore. EBITDA stood at ₹2,689 crore.

Asked on the guidance for FY24, Khdloya said: “We bettered our FY23 guidance. But right now it is too early to make one for FY24 especially for the next couple of months.”

Investments

Embassy REIT is investing ₹4,000 crore towards organic expansion, for development of 79 lakh sq ft of space Nearly ₹1,200 crore has already been invested and the remaining ₹2,800 crore is expected over the next few years.

The entire 79 lakh sq ft is expected to come up in a staggered manner over the next four years and it would lead to an NOI addition of ₹900 crore to the company.

Evaluation for acquisition of office space in Chennai continues. “We remain keen towards expanding presence in the top six markets and specific micro markets within these cities,” he said. The REIT had recently made a ₹335-crore acquisition for a 14 lakh sq ft of space in Bengaluru.

Incidentally, Aravind Maiya will take over as the new CEO from July 1, while Khdloya will be Senior Advisor to the REIT till the end of this year.

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