December 1, 2023: India’s flex space stock is expected to reach 80 million square foot (msf) by 2026, forming 9-10% of the total Grade A office stock of the country, according to Colliers’ report.
The report ‘Shared Office Spaces in India – Flexing Ahead’ released at FICCI’s 2nd Edition of Commercial & Industrial Real Estate Conclave in Bangalore, mentioned that India’s flex space market has grown stronger and bigger post-pandemic, faster than its peers in the APAC region. Flex space stock across the top six cities has nearly doubled since 2019, and currently stands at 43.5 msf, 6.3% of the total Grade A office stock. This is relatively higher compared to 3-4% flex space market penetration in other key markets within APAC. The Indian office market indicates a higher affinity for shared workspaces. A positive economic outlook, evolving workplace trends, increasing diversification of the occupier-base will continue to drive flex space demand across the top markets in the country, the report said.
Arpit Mehrotra, managing director, South India, office services & head of flex, Colliers India, said, “Flex leasing in India has gathered significant momentum in recent years, reaching an all-time high of 7 msf in 2022. This spurt in flex activity continued in 2023 as well, reinforcing the gradual shift in the way businesses are realigning their real estate portfolio decisions. Also, Bengaluru with a one-third share dominates flex space leasing similar to overall office leasing market. By the end of 2023, flex space leasing is estimated to constitute an impressive 15-20% of overall office leasing and this is noteworthy. This only reiterates the evolving needs of businesses, that places greater emphasis on agility & flexibility in today’s dynamic work environment.”
Flex spaces witness high growth across core markets
The report stated that Bangalore remains the largest flex space market housing 1/3rd of the total flex stock of the country, followed by Delhi-NCR. Prominent tech hubs such as Pune and Hyderabad are also witnessing increased traction and are expected to grow at a faster pace, owing to rising demand from large technology occupiers. Interestingly, Pune currently has the highest flex space penetration at 8.9%, followed by Bangalore at 7.5%.
Similar to the overall India office market, the flex market is also highly concentrated in certain prominent clusters across Tier I cities. Top 10 flex micro-markets such as ORR- Bangalore, SBD- Bangalore, SBD-Hyderabad, Andheri East-Mumbai, Baner Balewadi-Pune, etc. house almost 60% of the total flex stock of the country.
SBDs remain the most popular flex markets; PBDs emerge as an affordable alternative
Owing to their strategic location, superior connectivity to other parts of the city, and strong physical & social infrastructure, Secondary Business Districts (SBDs) remain most active flex markets within cities, accounting for more than half of the flex stock of the country. CBDs, which were the primary hubs for flex spaces, have seen limited activity in recent years due to scarce availability of new age Grade A workplaces and relatively high rentals. Peripheral markets, on the other hand are fast emerging as flex market hotspots owing to comparatively lower price points, upgradation of infrastructure and improving connectivity within the city. As occupiers look to decentralise their office portfolios to enable a distributed workforce strategy, PBDs are poised to witness significant upswing in next few years.
Vimal Nadar, senior director & head of research, Colliers India, said “As businesses embrace a distributed workforce strategy, Peripheral Business Districts (PBDs) are fast emerging as influential clusters of flex space activity in India. Basis their strategic locations, superior connectivity, and cost-effectiveness, PBDs are rapidly gaining traction as an affordable and viable alternative for flex spaces, accounting for a significant 27% share flex space portfolio. Furthermore, the emerging trend of decentralisation in office portfolios, with off-shoot offices in PBDs is poised to drive heightened activity in these micro markets.”
Cumulative seat uptake crosses 250,000 since 2020; Flex space demand gets more broad-based
Driven by flexibility, agility and cost-effectiveness, flex spaces are becoming an integral part of occupiers’ portfolio, with its share in occupiers’ total portfolio rising to an estimated 10-12% in 2023, from 5-8% before the pandemic in 2019. Annual flex seat uptake by occupiers has already witnessed a 6-fold growth in 2023 as compared to 2020. Technology occupiers have been one of the driving forces of rising flex space demand across the country, currently occupying over half of the total flex space across the top six cities. However, the demand for flex space is getting more diversified with all occupier categories, including non-tech firms such as engineering & manufacturing, BFSI and consulting adopting flex spaces. There has been an increased flex space take up from non-enterprise clientele, including domestic startups and new-age companies as well.
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