A Brief Review of Office Space Market 2023

As 2022 witnessed consolidation, 2023 stood as a testament to the enduring strength and favourable trends in India’s CRE (commercial real estate) sector. Despite the global economic turmoil, the CRE sector in India witnessed remarkable resilience backed by advanced workspace solutions. Notably, the market observed an increased focus on sustainability, bespoke solutions, employee well-being, modern designs, and prime locations.   

Moving ahead, we will delve into the remarkable growth of the office space segment in India during 2023, shedding light on the integral role played by Smartworks in contributing to this transformative narrative. 
 

2023: A Pinnacle Year for Indian Commercial Real Estate 

In 2023, India truly shone as the office to the world and appeared as a beacon of stability and persistence across diverse industries. Despite the year’s recessionary winds and inflation, managed and flexible office space for large companies became a trend that was further powered by hi-tech workspace solutions, cost advantages, aspirational amenities, and more. Listed below are the key snapshots that fortify the growing supremacy of furnished office space in India.

GCCs and Flex continue to drive market growth: 

According to a recent report (2023: Year in Review) from JLL, remarkable advancements in Manufacturing/Industrial, BFSI, and Consulting have been achieved by establishing Global Capability Centers (GCCs) in India.  
 
Additionally, the leasing activity in the first three-quarters of FY2023 covered about 80% of the total seats leased in 2022. The sustained demand for flex spaces became an essential element of occupier strategies incorporating both conventional and on-demand flexible workspaces in India, aiming for enhanced employee experience.

Clusters within SBDs became preferred flex locations: 

GCCs and Flex continue to drive market growth: 

According to a recent report (2023: Year in Review) from JLL, remarkable advancements in Manufacturing/Industrial, BFSI, and Consulting have been achieved by establishing Global Capability Centers (GCCs) in India.  
 
Additionally, the leasing activity in the first three-quarters of FY2023 covered about 80% of the total seats leased in 2022. The sustained demand for flex spaces became an essential element of occupier strategies incorporating both conventional and on-demand flexible workspaces in India, aiming for enhanced employee experience. 

Clusters within SBDs became preferred flex locations: 

CBDs were the primary hubs for flex spaces, but with the evolution of SBDs (Secondary Business Districts), the peripheral areas are likely to witness a boost in the next few years. As of September 2023, SBDs have emerged as the most popular flex markets for businesses to commence and expand their operations.  
 
Per the Colliers report (Shared Office Spaces in India – Flexing Ahead), 60% of the total flex stock of India is in the top 10 micro markets, including ORR, Whitefield, CBD, and SBD 1 in Bengaluru, SBD and Off SBD – Hyderabad, Andheri East – Mumbai, Baner-Balewadi and CBD – Pune, and Noida Expressway. 

Tier-2 cities emerged as a new ground for flex space operators: 

India’s non-metros, referred to as Tier-2 and Tier-3 cities, have gradually spurt out as growing hubs for trade and businesses. It’s not just the MSMEs; even the growing and offshore enterprises are looking forward to expanding their footprints across the top 10 tier-2 cities. In the midst of fierce competition, businesses find Tier-2 cities increasingly appealing, driven by cost-effectiveness, the availability of skilled professionals, infrastructure development, and market potential. These cities are Jaipur, Kochi, Coimbatore, Ahmedabad, Indore, Chandigarh, Lucknow, Thiruvananthapuram, Visakhapatnam, and Bhubaneswar.  
 
A detailed report titled “The Office Sector’s Ascent: Tier-2 Cities on the Horizon,” from CBRE, unfolded the overall office absorption, which stood at around 1.6 million sq. ft. in the Jan-Sep 2023 period. Also, the total office stock in these cities stood at approximately 68 million sq. ft. as of Sep 2023, with Ahmedabad, Kochi, and Thiruvananthapuram each boasting higher than 7.5 million sq. ft. office stock.  

Dominance from Tier-1 cities resulted in higher supply: 

Another report (India Office Figures – Q4 2023) from Colliers sheds light on the impressive surge in new project completion and overall absorption in Tier-1 cities. The supply for new projects increased at a significant pace, marking a rise from 50.3 million sq. ft. in 2022 to 56.7 million sq. ft. in 2023. Bangalore, Hyderabad, and Chennai remained prominent hubs, with almost 68% of the new projects completed.   
 
On the contrary, Hyderabad, Delhi-NCR, and Bangalore dominated supply with a combined share of 68% on a quarterly basis. Continuing the trend observed in 2022, domestic enterprises remained on the top in overall absorption activity on a quarterly and yearly basis, with shares of 45% and 44%, respectively. 

In 2023, the Indian CRE market outpaced peers in the Asia Pacific region, propelled by the symbolic growth of GCCs and flexible workspaces. The strategic preference for clusters within the SBDs and the rise of Tier-2 cities as flex space hubs reflect a dynamic shift in market dynamics. Flex and pure-play managed space operators like Smartworks have played an enormous role in uplifting the workplace dynamics, offering bespoke solutions that cater to the evolving needs of businesses and professionals alike.  
 

Smartworks Role in Advancing the Flex and Managed Workspace Sector in 2023 

Smartworks is one of India’s leading platforms for managed office spaces. In 2023, we achieved unparalleled success by delivering advanced workplace solutions that redefined the standards of workspaces in India. Let’s look at the pivotal achievements that propelled us to unprecedented heights in 2023.

Expanding Horizons in Tier-2 Cities 

In the evolving landscape of India, Tier-2 cities like Ahmedabad, Jaipur, Indore, Kochi, and Coimbatore have emerged as bustling hubs for trade and business. This transformation is evident, with overall absorption reaching approximately 1.6 million sq. ft. in 2023. In parallel, Smartworks marked a significant milestone with a strategic expansion in Kochi and Coimbatore. With 14 cities and 40+ locations, we expanded our total footprint to a staggering 8 million sq. ft.  

Supply Milestone 

In tandem with the remarkable surge in the Indian flex space market, the supply for new projects skyrocketed, escalating from 50.3 million sq. ft. in 2022 to an impressive 56.7 million sq. ft. in 2023. Simultaneously, Smartworks achieved a noteworthy milestone by signing over 2 million sq. ft. of supply to offshore and domestic enterprises. Additionally, a twofold increase in our revenue underscores the efficacy of our business model and the value we deliver to our enterprise clients. 

Onboarded 150+ Enterprise Clients 

In the vibrant landscape of India's flex space market, clusters within CBDs and SBDs emerged as the epicentre for businesses to commence and expand their operations. Being a notable player in the flex and managed workspace segment, Smartworks responded to the market demands by onboarding 150+ enterprise clients along with 160k+ seats leasing across India. 

Since we have moved into 2024, projections suggest that there will be an increase in net absorption with 20-22% y-o-y to touch 45-47 million sq. ft. Hence, the trajectory of the Indian flex space market will continue to ascend and Smartworks will continue to deliver the best workspace solutions to enterprises.