Embassy REIT Aims for 20% YoY Increase in Leasing, Eyes 6 Million Sq. Ft. in FY24


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    Embassy Office Park REIT, the largest real estate investment trust in the country, has set ambitious leasing targets for FY24. CEO Aravind Maiya recently stated that the company is aiming for a 20% year-on-year increase in leasing space, targeting an impressive 6 million square feet.

    During Q1FY24, the company successfully leased out 1.1 million square feet, and negotiations for an additional 2 million square feet are currently in advanced stages. Of the 1.1 million square feet leased in the April-June period, 0.4 million square feet will be allocated to new leasing, 0.45 million square feet to pre-leasing for upcoming projects, and the remaining 0.25 million square feet to lease renewals.

    Of note, over 80% of the new or pre-leasing agreements were secured from existing occupiers, with 71% of the demand coming from global capability centers. The stability in the interest rate environment and robust market conditions in Bengaluru, where 75% of Embassy REIT’s properties are located, have contributed to their confidence in achieving the target leasing guidance for FY24.

    Aravind Maiya highlighted the breakdown of the leasing allocation, stating that 4 million square feet will be dedicated to new leasing, 1.3 million square feet to pre-commitments for future projects, and 0.7 million square feet to lease renewals.

    Embassy REIT has been able to command rentals that are 5-6% higher than the market average. The overall occupancy across their properties is around 85%, with Bengaluru boasting an impressive 94% occupancy rate. Similarly, Mumbai, accounting for 10% of its property spreads, enjoys occupancy levels of approximately 91%. In the future, they expect occupancies to improve further in markets like Pune, where a Metro project is proposed, and Noida, where the upcoming Jewar airport is expected to boost demand.

    Despite evaluating acquisition opportunities in Chennai, Embassy REIT has no immediate acquisition plans due to the higher cost of borrowings. The cost of debt is projected to be around 7.9% for the fiscal year, compared to the existing 7.3% in Q1. Debt refinancing of nearly ₹4,100 crore will be due this fiscal year, and with the current refinancing cost around 8%, the company’s focus will be on increasing leasing and driving up stock prices before pursuing new acquisitions.

    With the encouraging prospects in Bengaluru and a stable interest rate environment, Embassy REIT’s ambitious leasing targets for FY24 could signal positive growth for the company, affirming its position as a leading real estate player in the market.

    Also Read:- Spurt In Demand For Affordable Housing Pushes Overall Residential Market; Sales Grew By 4%; Launches Rise by 21%: Knight Frank Report


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