Tier-2 cities sought after by flex office operators: Report

January 29, 2024: Over 26 major flex office operators recorded presence across 10 Tier-2 cities in 2023, mentions a recent report by CBRE South Asia. The report titled The office sector’s ascent: Tier-II Cities on the Horizon mentioned Chandigarh, Jaipur, Lucknow, Coimbatore, Kochi, Thiruvananthapuram, Vishakhapatnam, Ahmedabad, Indore and Bhubaneshwar as the ten Tier-2 cities. According to the report, flexible workspace operators are recognising the potential of these markets and are rapidly expanding their presence, providing options for start-ups and established firms.

The report indicates that Ahmedabad has the highest flex stock, with more than 0.5 million square feet (msf) as of Sep ’23. Other cities, including Chandigarh, Jaipur, Coimbatore, Kochi and Indore, have flex stock between 0.3-0.5 msf. Lucknow, Thiruvananthapuram, Visakhapatnam and Bhubaneswar have flex office stock lower than 0.3 msf. Prominent flex operators such as Awfis and Incuspaze recorded a presence in more than five cities, including Jaipur, Kochi, Lucknow, Thiruvananthapuram, Ahmedabad, Indore and Bhubaneswar. Other players who forayed into these cities include IWG, IndiQube and Smartworks, among others.

City	Prominent Flex office operators
Chandigarh	Next57, IWG, MySoho, Awfis
Jaipur	Awfis, Skootr, Smartworks. DevX, IndiQube, IWG
Lucknow	Incuspaze, IWG, MyBranch, Summit Space
Coimbatore	IndiQube, Mikro Grafeio, Wrkpod, IWG
Kochi	Awfis, Incuspaze, Mikro Grafeio, Centre A, Workshaala, IndiQube, Dotspace
Thiruvananthapuram	Workshaala, Dotspace, The Atomic, Incuspaze, SpazeOne, Mikro Grafeio
Visakhapatnam	Qubexpro, HawkisH, IWG, MyBranch
Ahmedabad	DevX, Opulence, The Address, Incuspaze, Smartworks, EFC Business Centre, Awfis, Workshaala
Indore	Smartworks, Awfis, IWG, Incuspaze, DevX, Workie
Bhubaneshwar	Awfis, Akasa Coworking, IWG, Incuspaze

According to the CBRE report, the overall office absorption across the 10 cities stood at 1.6 msf in the Jan-Sep’23 period, led by Ahmedabad, Jaipur and Thiruvananthapuram. The total office stock in these 10 tier-2 cities stood at 68 msf as of Sep ’23, with Ahmedabad, Kochi and Thiruvananthapuram, each boasting office stock higher than 7.5 msf. The total office supply recorded in these 10 cities was 3.4 msf during Jan-Sep ’23. The top cities dominating supply addition in CY2023 include Ahmedabad, Kochi and Indore.

Tier-2 cities are fast emerging as the next growth frontier for the office sector. According to the report, with their growing talent pool, competitive real estate costs, and improving infrastructure, these cities are well-positioned to attract more businesses in the future. The sectoral drivers of office space demand in Tier-II cities include IT, Technology, flexible space operators, e-commerce start-ups, technology GCCs, consulting and advisory GCCs and Indian BFSI firms.

Traditionally, office spaces in smaller cities have been dominated by Grade B buildings, characterised by smaller floor plates, and limited amenities. However, recognising the growing demand, Tier-2 cities have been witnessing the development of modern office parks.

Anshuman Magazine, chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE, said, “India’s Tier-1 cities have been the main drivers of economic growth in the country being prime employment hubs. At the same time, India’s non-metros, referred to as Tier-2 and Tier-3 cities, have primarily been seen as residential or industrial centres, developing as hubs of trade and businesses over decades. The growth of micro, small and medium-sized enterprises (MSMEs) has been a key driver of economic activity in non-metro cities, providing a vital boost to local economies.

India Inc. and numerous multinational companies are increasingly setting up offices in Tier-2 cities, capitalising on cost-effective real estate and the availability of talented professionals. This trend is further bolstered by the rise of local start-ups and the expansion of established start-ups into these smaller markets.

Looking ahead, information technology (IT) and technology companies are expected to be at the forefront of this shift towards smaller cities. CBRE also expects a surge in the number of companies setting up their global capability centres (GCCS) in select Tier-2 cities”.

Ram Chandnani, managing director, of Advisory & Transactions Services, CBRE India, said, “Over the next few years, Tier-II cities would witness a higher number of modern office developments, including flex spaces replete with amenities that are appealing to global and domestic occupiers. Further, prominent developers would bring international standards and a proven track record to enhance the real estate profile of Tier-II cities.

Global and domestic firms are likely to adopt several entry strategies to establish and expand their footprint, including flex spaces and traditional office spaces. Established IT services firms would likely explore campuses for their offices. Global firms are likely to see the appeal of Tier-II cities for their GCCs, aided by cost considerations and the availability of skilled talent. Tier-II cities are gradually emerging as hubs for technology talent, bolstered by higher educational institutions and professional institutes. As occupiers mark their entry in Tier-II cities and the quality of life improves, talent retention in these cities would emerge as a game-changer. India’s budding start-up ecosystem is likely to enhance experienced talent for specific domains such as artificial intelligence and machine learning.”

Top 5 office Markets in Tier-II cities

Chandigarh: The joint capital of Punjab and Haryana, the city stands as one of India’s few planned cities. As the city’s residential base flourished, the social infrastructure received a boost, adding to the city’s vibrancy. Chandigarh is home to several prestigious colleges, attracting IT companies to set up offices. Prominent office spaces include DLF IT Park, Unity CP 67, SP Infocity, and QuarkCity.

Office space supply and absorption during Jan-Sep’23 stood above 120,000 sqft respectively, with stock ranging between 6 – 7.5 msf.
Key micro-markets of Chandigarh are located at Central Chandigarh, Mohali – Sectors 66 & 67, Industrial Area Phase I & II. Mohali – Sector 82 is an emerging micro-market witnessing increased occupier interest due to its strategic location (closer to the airport) and competitive rentals. Mohali – Phase 8A & 8B- an older micro-market with Grade A occupier presence in SEZ assets – SP Infocity & Quark.
Key office occupiers in the market include IBM, Teleperformance, Concentrix, TaskUs, Alorica, Bunge
Key startups present in the market are Evage Motors, Ayu Health, LetsShave, Cloud Scale Inc

Coimbatore: While Coimbatore is a key industrial hub, the city is also emerging as a destination for IT and technology companies. The city’s diverse talent pool, led by the presence of numerous colleges, and the city’s proximity to Bangalore and Kochi, have added to its attractiveness as an office hub. Prominent office spaces include Hanudev Infopark, KCT Tech Park, KGISL Tech Park, Tidel Park, SVB Tech Park, Rathinam Tech Zone, and TICEL.

Office space absorption during Jan-Sep’23 stood higher than 1,20,000 sqft, while supply stood in a range of 50,000-80,000 sqft and stock stood at 6 – 7.5 mn sqft.
Key micro-markets of Coimbatore are located at RS Puram, Gandhipuram, Avinashi Road till Lakshmi Mills, Trichy Road, Saravanampatti. Pollachi Road, the micro-market is located near Eachanari, a location dominated by MSMEs; a project by L&T is expected to be operational by 2026. Avinashi Road, TIDEL4.4 Park and Airport is an upcoming commercial micro-market with large IT occupiers preferring the TIDEL Park office development
Key office occupiers in the market include CTS, Bosch, Amazon, Schlumberger, Infosys, HCL
Key startups present in the market- Ticket 9, Kovai.co, BNC Motors

Kochi: A port city, it is the second-largest urban conglomerate in Kerala. Kochi’s economy is driven by shipbuilding, chemicals, and tourism. As the commercial capital of Kerala, the city’s office ecosystem is well-developed, dotted with the presence of several technology parks. Over the last few years, the city has seen the proliferation of GCCs as well as home-grown start-ups across sectors such as technology and fintech, amongst others. Prominent office spaces include Brigade World Trade Centre (WTC), Lulu Cyber Tower, Prestige TMS Square, and Prestige Cyber Green.

Office space absorption and supply during Jan-Sep’23 stood higher than 1,20,000 sqft respectively. Stock is noted as higher than 7.5 mn sqft.
Key micro-markets of Kochi are located at MG Road, Kaloor, Kadavanthra, Panampilli Nagar, Thevara, Vyttila, Palarivattom, and Edappally. Kakkanad, Seaport-Airport Road, a well-established office destination, the micro-market hosts several technology firms
Key office occupiers in the market include Wipro, CTS, TCS, Sutherland, EY
Key startups present in the market- Entri.app, Growcoms, EduBrisk

Thiruvananthapuram: The capital city of Kerala is well-known for its educational institutions, mineral-based industries, and tourism. A premier IT hub, the city is aided by the presence of R&D institutes, technology parks, and an experienced talent pool. Prominent office spaces include Technocity, Technopark, Embassy Taurus Techzone, and Accel Infinium.

Office space absorption and supply during Jan-Sep’23 stood above 1,20,000 sqft respectively. Stock for the city is noted to be higher than 7.5 mn sqft.
Key micro-markets of Thiruvananthapuram are located at Kazhakoottam, Chacka, and Pallippuram. MG Road, Pattom, Palayam, Thampanoor- The micro-market comprises small offices suitable for client-facing firms such as banks.
Key office occupiers in the market include UST, TCS, Allianz, Infosys, Suntec
Key startups present in the market- Genrobotics, Twylabs, Inzpira

Ahmedabad: is a prominent manufacturing and trading hub in western India. Over the last decade, the city has attracted global and Indian firms, led by its investor-friendly government. The city has a high presence of good quality office spaces and is known for its infrastructure development. Prominent office spaces include GIFT City, Mindspace Gandhinagar, and Hiranandani Signature.

Office space absorption and supply during Jan-Sep’23 stood above 1,20,000 sqft respectively. The stock was noted to be higher than 7.5 msf.
Key micro-markets of Ahmedabad are located on Ashram Road, Chimanlal, Girdharlal Road, SG Highway, Prahlad Nagar, Corporate Road, and Iscon Ambli. GIFT City, Mindspace SEZ, Sargasan, Science City an emerging office micro-market; houses various global technology and BFSI occupiers.
Key office occupiers in the market include Adani Group and Vodafone
Key startups present in the market- Medkart Pharmacy, Petpooja, Renée Cosmetics, MatterEnergy

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Anuradha Ramamirtham

With 16+ years of experience in various sectors, of which more than ten years in real estate, Anuradha Ramamirtham excels in tracking property trends and simplifying housing-related topics such as Rera, housing lottery, etc. Her diverse background includes roles at Times Property, Tech Target India, Indiantelevision.com and ITNation. Anuradha holds a PG Diploma degree in Journalism from KC College and has done BSc (IT) from SIES. In her leisure time, she enjoys singing and travelling.
Email: [email protected]

Top 5 office Markets in Tier-II cities

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