NEW DELHI: The outlook for office leasing is expected to improve as more companies are asking employees to return to office. This is an important conclusion from the recent analyst meet of Embassy Office Parks REIT.
The company’s management told analysts that it expects a good recovery in office leasing from FY13 onwards, driven by a pick-up in physical occupancy levels. Management said strong hiring by Global Captive Centers (GCCs) and IT product companies will fuel this demand. Investors should note that both of the above segments contribute to 70% of the total space leased by Embassy REITs. Bengaluru is likely to benefit the most from the pace of increase in office leasing as it currently accounts for 60% of the total requests for proposals invited.
The management said that as per its discussion with the occupants, physical occupancy is likely to improve to 20-25% in April and 40-45% in the next few quarters. Currently, physical occupancy stands at 10-15%, the management said.
Investors would believe that the company raised its leasing guidance for FY13 to 1 million square feet (msf) from 0.4 msf in the third quarter of FY12. In its latest conversation with analysts, management said it was confident of achieving its revised guidance. The company is also looking at various organic and inorganic expansion opportunities.
The management said its hotel vertical is witnessing a revival with the resumption in corporate travel. Management highlighted that for its newly opened Hilton Garden Inn, 50-60 corporate accounts have already been signed up and an additional 50 corporate accounts are in the pipeline.
Meanwhile, REIT Manager shares are up nearly 10% so far this calendar year. Analysts say further upside in the stock will be driven by the pace of recovery in office leasing and its impact on occupancy levels.
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