For the development of premium workspaces
Embassy Office Parks REIT will invest about ₹2,200 crore in the next four years to develop premium workspaces as it sees tremendous growth potential in the office market despite global recessionary concerns, its CEO Vikaash Khdloya said.
He said the office demand in India would remain strong as large global companies want to open offices in India because of the huge availability of a cost-efficient talent pool and cheap rentals for premium workspaces. This trend would only strengthen amid global recessionary fears, which will lead to increased outsourcing of work to India.
Bengaluru, which is its core market with a significant presence, is leading the resurgence of India’s office market that suffered a setback during the pandemic, he added.
Embassy Office Parks REIT is India’s first Real Estate Investment Trust (REIT) sponsored by global investment firm Blackstone and Bengaluru-based realty firm Embassy group. It has a completed portfolio of about 34 million square feet of office space across Bengaluru, Mumbai, Pune and Noida. REIT, a popular instrument globally, was introduced in India a few years ago to attract investment in the real estate sector by monetising rent-yielding assets. It helps unlock the massive value of real estate assets and enable retail participation.
On operational performance so far this fiscal year, Khdloya highlighted that the company has leased 3.4 million square feet of office space during April-September and already achieved 70% of the full-year leasing target of 5 million square feet. The leasing, both fresh and renewals, has been done at a higher monthly rental.
Office rent in India continues to be very low at $1-2 per square feet a month compared with global standards. “With recessionary fears, what we believe will happen is that as companies look to optimise costs and efficiency, it will mean more demand to India. More off-shoring of work to India which will again create demand for real estate space,” Khdloya said.
Bullish on demand for premium workspace going forward, the company has started construction work of a fresh 2.5 million square feet area during the July-September quarter. The company is developing a total of 7.1 million square feet of office space currently, including the new 2.5 million square feet, and these will get completed over the next 3-4 years.
“We have committed a capex of ₹3,200 crore to develop the 7.1 million square feet area. Out of this, ₹1,000 crore has already been spent and the balance ₹2,200 crore will be invested over the next 3-4 years,” he added.
That apart, Embassy REIT is also looking for inorganic growth and is negotiating with one of its sponsors Embassy Group to buy assets in Chennai and Bengaluru. The company has signed non-binding offer letters for the potential acquisition of two high-quality office properties in Bengaluru and Chennai. These two assets have a total leasable area of 7.1 million square feet, of which 3.7 million square feet is completed or nearing completion.
Recently, Embassy Office Parks REIT reported a 13% increase in net operating income to ₹703.8 crore for the quarter ended September, as against ₹623.6 crore in the year-ago period.