Cash Flows In Office Leasing Least Affected By COVID-19
<span style="font-weight: 400;">The cash flows in the office leasing segment have been among the least affected by the COVID-19 pandemic. For YTD FY2021, there has been limited revenue loss for developers of Grade A office space while the occupancy in the existing leased portfolio has not witnessed
Published -
Jan 16, 2021 4:01 AM
The cash flows in the office leasing segment have been among the least affected by the COVID-19 pandemic. For YTD FY2021, there has been limited revenue loss for developers of Grade A office space while the occupancy in the existing leased portfolio has not witnessed any material weakening till date, said ICRA. However, the segment has witnessed lower incremental pre-leasing and absorption of completed supply during FY2021, compared to the earlier years. The economic impact of COVID-19 on various corporate sectors, business travel restrictions and scenario of extended work-from-home adopted by many tenants had considerably slowed down new pre-leasing during H1FY2021. Thus, while occupancies in operational assets were largely intact, pressure on overall occupancy in the market may arise as newer properties become operational over FY2021 and FY2022 without adequate pre-leasing. There are many factors which could support a healthy bounce-back in leasing activity – including easing up of travel restrictions, widespread vaccination programmers which can enable workforces to come back to offices safely, as well as expectations of strong economic recovery once the pandemic eases up. Due to relatively stable cash flows and limited impact on occupancies in existing properties, the credit profile of most of ICRA’s rated issuers in the office leasing segment is expected to be stable, the analysis said. However, credit profile of developers with large portfolios that are getting commercialized in FY2021 and FY2022 may be under pressure in case of slow leasing progress along with high refinancing requirements. The extent of financial flexibility, as measured through leverage in the existing operational portfolio will be a key determinant of the credit profile in such scenarios. Credit risk profile of retail segment to improve gradually in FY2022