DLF expects office leasing recovery by FY 23

DLF Cyber City Developers Ltd (DCCDL) expects office space leasing to reach the pre-Covid level in fiscal 2023, managing director Sriram Khattar of the rental arm of property developer DLF told investors on an earning call Saturday.
DLF’s newly appointed chief executive, Ashok Tyagi, said the rental portfolio would be ready to be listed as a real estate investment trust (REIT) in the next four quarters, and that the decision on the REIT’s listing would be made by DLF and its partner in DCCDL, Singapore sovereign fund GIC, based on the market situation.

No decision has been made yet on including the retail assets in the proposed REIT, Tyagi said.

Khattar said the market would reach 90% of the pre-Covid level by FY23 “if we continue to vaccinate at the same pace (as now) and manage to vaccinate a substantial population by the end of this year”.

The construction of DLF Downtown Chennai and Gurgaon office properties remains on track, said Khattar.

Office rental of the company increased 10% in fiscal 2021 from the year before, driven by the completion of Cyber Park, Chennai Block 11 and renewals. Retail revenue fell 46% due to lockdown and rental waivers.

The real estate company leased 4.3 million sq ft in FY21 but vacancy levels had gone up due to temporary dislocation caused by the second wave of the pandemic.

“Occupiers’ decisions were deferred due to the sudden spike of the second wave. However, the IT sector including captives continued to exhibit growth and hiring activity is expected to rise. Long-term outlook for offices remains healthy,” the company said in a presentation to investors.

DLF reported a net profit of Rs 477 crore for the quarter ended March 31, driven by strong demand in its residential business and lower land price as well as interest costs.

Consolidated revenue of DCCDL at Rs 4,385 crore for FY21 was lower than in FY20, primarily due to the impact on its retail business.

DLF said demand in the April-June quarter was expected to remain muted due to the pandemic resurgence and consequent lockdown restrictions.

“The retail business witnessed a steady recovery, with the luxury segment leading it. Healthy footfalls and higher spend per footfall were evident in the second half,” it said in a news release.

DLF is getting offices ready for reopening by taking additional safety measures. “We are increasing the air-changes per hour to minimise stagnation of indoor air enhancing ventilation and exhausts. We have also adopted a contactless approach with fully automated doors, touch-less elevators, gadgets for permitting entry of patrons where body temperature meets recommended levels and restricting entry only to properly masked patrons and capturing image at point of entry,” the company said.