On Friday, BofA Securities updated its outlook on Embassy Office Parks REIT (EMBASSY:IN), increasing the price target to INR415.00 from INR395.00. The firm has retained a Buy rating on the stock. The adjustment follows a robust second quarter for the company, which saw a significant amount of new leasing activity.
The company's successful leasing in the second quarter, amounting to 1.3 million square feet (msf), compensated for a slower first quarter. This performance led to an upward revision of the fiscal year 2025 new leasing guidance, from 3.8 msf to 4 msf. Despite a strong conversion in the quarter, the pipeline discussions for potential leases remained steady at 1.5 msf.
Occupancy rates have also shown improvement, with area occupancy climbing from 85% to 87%. This growth was particularly notable in the Manyata asset, which saw its occupancy rate increase from 83% to 87%. Additionally, the rent-weighted value occupancy rose by 200 basis points to 90%.
Although the company experienced an increase in lease expiries by 0.6 msf for the year, this was attributed to a one-off situation with a client in the Information Technology Enabled Services (ITeS) segment and was not seen as indicative of the broader demand environment. Despite these lease terminations, the company anticipates that both area and value occupancy rates will be higher by the year-end, reaching 88% and 92%, respectively.
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