Oct 04, 2023

A Brief Analysis of the Indian Flex Space Market in FY23

Office Spaces

The trick to maximizing your team’s productivity is to create a workspace that’s flexible, so it can be altered according to the ever-changing needs of the company and its team members. - Neil Blumenthal 

The work environment is changing and to keep up the same, pure-play managed operators are adapting to provide an ideal balance between agility and flexibility. Today’s workspaces require a perfect blend of modern elements that allow the occupiers to operate in a hassle-free and collaborative environment. Evolving from the concept of traditional and co-working spaces, the flex space market in India has produced exceptional results in recent times for both operators and occupiers.  

India’s CRE segment has witnessed two different patterns. First, the pre-Covid era was characterised by coworking arrangements. Whereas the post-Covid period brought a drastic transformation with flexible work arrangements for enterprises. Pure-play managed operators with 360-degree bespoke space solutions have been the key drivers of flex resurgence growing at a CAGR of 70% since 2018. 

Gone are the days when workspaces were all about tables and chairs. Moving further, we will discuss how flex space solutions are addressing the varied needs of occupants and gaining long-lasting momentum. 

You can read also about The Unprecedented Rise of Flexible Workspaces 

The Ascendancy of Flexible Workspaces in India

Recently, JLL published a detailed co-branded report with Smartworks indicating the unprecedented rise of flex and managed workspaces in India. India’s flex space market is now an integral part of the CRE landscape, playing an imperative role in occupiers’ portfolio strategies. This alignment is evident to demonstrate the remarkable growth of the flex space segment, resulting in a surge of almost 400% since 2018 with a total operational footprint of 53.0 million square feet in FY 2023. 

The rise of flexible spaces in 2023 can be cognizant of the key highlights from this report. 

  1. Pure-Play Managed Operators Leading Flex Space Expansion.

  1. Rapid Adoption of Flex & Managed Spaces by Indian Occupiers. 

  1. IT Sector Continues to Dominate the Flex Space Leasing. 

  1. Elevating Office Experience via Technology.  

  1. Rise of Tier-2 Cities for Flex Workspaces. 

1. Pure-Play Managed Operators Leading Flex Space Expansion

The rise of managed and flex operators has plugged in the great sense of awareness among startups, MSMEs, and large corporates regarding the evolving workplace dynamics. Flex and managed workspaces are being utilized across the entire commercial real estate segment for a much-needed headroom and strategic process for vigorous resource planning. The steady growth of flex is expected to double in the next five years, resulting in almost 106 million square feet of total operational flex stock.  
The adoption of the growing flex space sector finds concurrence in the conducted survey which is a part of this report. Almost 63% of respondents have plans to keep their conventional spaces but are also willing to add more flexible workspaces to their overall portfolio.  

2. Rapid Adoption of Flex & Managed Spaces by Indian Occupiers

Be it politics, investments, sports, or business, we Indians have a tendency to maximise every opportunity and fetch the best out of it. The scenario is consistent in this context as well. Managed space operators have witnessed a 10x growth compared to 2018, with almost 15 million square feet of area under management till March 2023. On the other hand, coworking players have experienced a downfall as businesses have shown more interest in leasing dedicated spaces to implement and optimise their unique strategies. 

3. IT Sector Continues to Dominate the Flex Space Leasing

Since the emergence of flex and managed spaces, Information Technology has been one of the most prominent sectors. The IT sector is still dominating the flex space segment, but with increased awareness, different sectors are also adopting these workspaces to a greater extent. Sectors like engineering & manufacturing, BFSI, logistics, consulting, and others are adding more flexibility to their portfolio by leasing workspaces across regions. 

4. Elevating Office Experience via Technology

The conventional ways to satisfy and retain employees are no longer effective in this dynamic landscape. Today's workforce has exposure to what offices in the West look like, and they are eager to work in such collaborative and modern spaces. Companies with higher growth paths tend to value their employees by providing an ideal working environment. As a result, many large, medium, and growing enterprises are leasing tech-enabled workspaces because their workforce gets exposure to top-notch amenities. On top of that, they have the power to choose design, layout, and other facilities that directly link to their business model and values. 

5. Rise of Tier-2 Cities for Flex Workspaces

If we talk about Tier-1 cities, Bangalore has dominated the race with a 39% share since 2018 in terms of operational flex stock. Delhi-NCR remains the second largest region with a share of 17%. On the other hand, Mumbai has been replaced by Hyderabad, Chennai, and Pune for highest flex stock. Despite the intense competition, Tier-1 cities remain a prime choice for businesses to lease flex spaces in 2023. Here a brief analysis about rise of flex space demand for Engineering & Manufacturing Sectors 

But wait, the rise of flex in Tier-2 cities is something to look out for. Another survey pointed out that almost 26% of respondents with their current operations limited to Tier-1 cities are planning to explore these smaller cities. They believe that Tier-2 are more cost-efficient as compared to the large metropolis. There’s a firm belief among entrepreneurs that to strategize their medium to long-term expansion plans, these cities will play a pivotal role in the coming years. 

As compared to shorter lease tenures of 1-2 years, occupiers are now putting full faith with longer commitments of 4-5 years. With the help of advanced technology and evolving workplace concepts, flex workspaces will remain a core strategy for occupiers to adopt a decentralised workspace model. Amidst these speculations and extraordinary numbers, there is a clear consensus that the future of the flex space market in India looks promising. 

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