Business News: Embassy REIT sees delay in rental decisions due to virus wave.
Parks REIT embassy office, backed by Blackstone Group Inc, is seeing new commercial office lease decisions delayed as India faces a second wave of Covid-19 infections, Chief Executive Michael Holland said in an interview after the earnings release.
“There were good signs of recovery at the start of the year, so it’s disappointing that we’ve had this second wave,” Holland said. “We have a good series of negotiations, but right now everyone is naturally focused on safety. In the coming months we will see a slowdown in leasing “.
India is facing a record number of infections and deaths: 386,452 cases were added every day until Friday morning and the total death toll has risen to 208,330. Several states in the country have been forced to announce blocks or restrictions on the movement of people, including in the capital New Delhi and the financial center Mumbai. The growing pandemic could delay economic activity from returning to normal, Reserve Bank of India Governor Shaktikanta Das said.
“I see the decision on smaller than 50,000 square foot deals being suspended for now, but I’m confident they will resume in a couple of quarters,” Holland said. “Larger deals of over 100,000 square feet that are typically decided over multiple quarters will continue to be discussed.”
Since the onset of the pandemic, new leasing contracts have slowed as companies have suspended or delayed their decisions to acquire new office space amid the trend to work from home. The embassy reported a drop in new leasing to 581,000 square feet in the year ending March 2021 from 2.4 million square feet in the previous financial year.
Despite the slower leasing, the existing portfolio of trust, which includes customers from multinational technology companies and financial institutions, continues to show robust performance. “89% of our properties are occupied by long-term leases, that income just keeps flowing,” Holland said. “We collected 99% of the rents during the last fiscal year. This gives us the ability to withstand this type of storm. “
The REIT’s net operating income increased 12% to 20.32 billion rupees ($ 274 million) last financial year. Units of Embassy REITs were trading at 316.55 rupees, up 1.5%, at 10.32 on Indian exchanges. In the medium term, the Netherlands sees a strong recovery in the Indian office market on the back of strong demand from global technology companies.