June 11, 2024: Demand for lexible office spaces in Tier 2 and 3 cities grew 12% annually in 2024 so far, and has the potential of going up to 28% by the year end, according to a report jointly published by Qdesq and MyBranch, players in flexible workspace solutions. The report reveals the growth and future potential of the flexible workspace market in India’s Tier 2 and Tier 3 cities. It also provides insights into how these cities are becoming economic powerhouses, driven by infrastructural advancements, government initiatives and changing workplace dynamics.
India’s economic landscape is rapidly evolving, with non-metro cities emerging as significant contributors to the national economy. According to the World Bank’s 2023 report, India achieved a 7% GDP growth in FY23, positioning it as the fastest-growing major economy on the global map. This robust economic performance is not limited to metropolitan areas; Tier 2 and Tier 3 cities are equally playing a crucial role in driving this growth.
Government initiatives such as the AMRUT (Atal Mission for Rejuvenation and Urban Transformation) and the Smart Cities Mission have been instrumental in transforming the infrastructure of these cities. These programs have enhanced urban amenities, attracted investments and fostered a thriving startup ecosystem. A survey by MyRCloud highlighted that non-metro cities created 1.7 million new white-collar jobs in 2023, surpassing the 1.5 million jobs generated in metro cities.
The joint report by Qdesq and MyBranch underscores a significant shift in the demand for flexible workspaces, towards Tier 2 and Tier 3 cities in India. It has reported a 4x growth in the supply of flexible workspaces in non-metro cities from 2020 to 2024. This surge is attributed to the increasing need for cost-effective and adaptable office solutions that accommodate the evolving work culture.
Kushal Bhargava, co- founder of MyBranch Services, said, “This report shows a remarkable shift in job creation, with non-metro cities generating 1.7 million new white-collar jobs in 2023, surpassing metro cities. We’ve seen significant interest from sectors like financial services, IT, insurance, e-commerce, and HR. Cities like Ludhiana, Vellore and Siliguri are emerging as prime locations for flexible workspaces, indicating a dynamic shift in India’s economic landscape.”
In 2023 alone, MyBranch received over 125 office space inquiries and generated approximately 70 leads from Tier 2 and Tier 3 cities. The top cities exhibiting high demand include Ludhiana, Vellore, Siliguri, Nashik and Jalandhar. The primary sectors driving this demand are financial services, IT, insurance, e-commerce and HR.
As per Qdesq, the surging demand for office spaces in smaller cities has resulted in an increase in prices. The report notes a 5-8% rise in the price per desk and per square foot from Q2 to Q3 of 2023. This trend reflects the escalating interest from large enterprises and startups alike. Approximately 30% of MyBranch’s clients in Tier 2 and Tier 3 cities in 2023 were large enterprises, highlighting the strategic shift of major businesses toward these emerging markets. As large enterprises continue to adopt hybrid work models and leverage local talent, the demand for flexible office spaces is expected to rise further.
The report forecasts a promising future for the flexible workspace industry in non-metro cities. With a projected 25% increase in inventory by the end of 2024, cities like Pune, Ahmedabad, Jaipur and Indore are set to lead the supply. By March 2030, the total Grade A and B office stock is anticipated to reach 1.4 billion square foot, with flexible office spaces comprising 33% of this total.
The startup ecosystem in non-metro cities is flourishing, driven by innovative entrepreneurs and supportive government policies. These cities offer a conducive environment for startups, including access to talent, lower operational costs and growing markets. The report indicates that non-metro cities are increasingly becoming hubs for innovation and entrepreneurship, contributing to job creation and economic diversification.
Businesses, especially startups and SMEs, prefer flexible workspaces for their affordability, scalability and convenience. The trend is also being adopted by large enterprises, which are shifting towards hybrid work models that combine remote and office-based work. This shift has led to an increased demand for coworking spaces, managed offices and virtual offices.
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