The firm, which has 5.7 million square feet (msf) of office properties under development, said demand for office space has halted but will bounce back soon.
“There is a pause due to the second (Covid-19) wave. We expect recovery in 2-3 quarters once employers are back to office. We continue to build and expect our projects to be completed from 2023 onwards,” said Vikaash Khdloya, chief operating officer, Embassy Office Parks REIT.
The firm plans to capitalise on the fragmented office market and is actively scouting for acquisitions. It has a pan-India acquisition potential of 31.2 msf with a Right of First Offer (ROFO) opportunity from the Embassy Sponsor and a similar opportunity of another 4.2 msf from other builders.
Despite the significant challenges caused by the Covid-19 pandemic, Embassy REIT has delivered on its financial guidance. It signed 1.2 msf of lease deals in the last fiscal year.
“Many tech firms are doing record hiring and we are confident that the demand will pick up much stronger in a few quarters from now,” said Mike Holland, chief executive of Embassy REIT.
Holland said its leading presence in India’s highest absorption markets, low leverage levels and access to capital markets ensure that it is well positioned to capitalise on the fundamental global demand for Indian office space.
The pandemic has led to a surge in India’s tech and digital investments by leading global enterprises. The country has a digital talent advantage that will lead to more tech opportunities. The IT industry is expected to see the highest ever headcount addition of over 3,50,000 during the ongoing financial year, experts said.
The company said its balance sheet remains strong, with leverage of 22% net debt to total enterprise value, liquidity of 1,550 crore and additional debt headroom of 12,600 crore.
“Despite the full pandemic year, we saw 12% annual growth in net operating income (NOI) last fiscal with 89% occupancy. The long-term prospect of demand for office in India remains strong,” Holland said.
In the previous fiscal year, the firm raised 5,200 crore debt at a coupon rate of 6.9% and refinanced 3,280 crore, leading to interest savings of 336 basis points. 100 basis points is one percentage point.
India is one of the most affordable office markets globally, with an average rent of $1 per sq ft per month.
