Over the past few years, the flex space segment has carved a niche. As the office segment continued to grow amidst surging demand from domestic and global occupiers, the flex space segment emerged as a key component of the office asset class. In FY2023, the operational footprint of the flex space segment reached more than 50 million square foot (msf); a 400% growth compared to 2018. Flex operators, who offer end-to-end customisation services, have been at the forefront of this growth story, contributing 70% CAGR over the last 6 years. This surge in demand for managed spaces is driven by enterprises proactively adapting to the ever-changing workplace dynamics. From large corporations to startups and MSMEs, industries are keen on leveraging the benefits of flexible solutions to optimise their resources, capital and operations. Flex solutions have become a critical component of real estate portfolio planning as they are used for flagship offices, high-end R&D teams and essential business functions. This has made flex solutions scalable and adaptable, catering to the evolving needs of businesses that require flexibility in their operations.
This holds for startups that are mushrooming across the country. Several southern states, such as Bengaluru, Chennai and Hyderabad, have emerged as the preferred destinations for new-age companies. Bengaluru, for example, offers an ideal ecosystem and infrastructure for startups to build their businesses. In recent years, the city has witnessed a surge in the flex space segment, catering to the evolving needs of startups. Bengaluru boasts a vibrant startup ecosystem that attracts entrepreneurs from across the country and the world. The city is home to some of India’s most successful startups, including Flipkart, Ola and Swiggy. It provides access to a vast pool of skilled professionals, mentors, investors and networking opportunities through startup hubs, incubators and accelerators. The flex segment has emerged as a prominent asset class in southern India, recording a footprint expansion in overall Grade A office leasing shares. The leasing shares of the flex segment increased from around 9% in 2021 to 14% in 2022. As per a report, Bengaluru’s office sector recorded a gross lease volume of 3.04 msf during Q2, 2023, a 35% growth quarter-on-quarter. Flex space operators expanded their footprint as the sector contributed a 13% share of Q2 gross leasing volume.
The high demand for flexible workspaces in top southern cities is trickling down to smaller cities, such as Thiruvananthapuram, Coimbatore and Mangaluru along with the startup culture. Adding to the volume are large organisations that are hiring flexible workspaces in smaller cities to enable employees to stay closer to home and drive retention while attracting core talent from these cities. This is driving significant demand for flexible workspace providers in southern cities. Several leading commercial space providers are partnering with national and local developers to establish or revamp existing spaces into premium office spaces. This foray of established players into smaller cities is increasing the organised share of commercial real estate in these cities while enabling infrastructure for startups.
As we look towards the next decade, India’s smaller cities will emerge as the new growth centres and flexible workspaces are going to be at the forefront of this change. Therefore, this is an opportune time to invest in flexible workspaces, as a developer, investor or occupier, to get the first-mover advantage and accelerate growth.
(The author is the founder & CEO of BHIVE Group)
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
Shesh Rao Paplikar completed his BE in Computer Engineering from NITK, Surathkal and started his first company while still a student at NITK. Later, he worked in the technology field for 11 years on Wall Street, New York before starting BHIVE in 2014. Shesh has been instrumental in building the BHIVE Group, consisting of BHIVE Workspace and BHIVE Capital.
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