Flexible workspaces to lease three million sq ft of space in 2021: Report

NEW DELHI: During 2021, flexible workspace operators are likely to lease about 3 million sq ft of space across the top six Indian cities, as operators are likely to focus on signing large enterprise-level deals and cut down on speculative centers, according to a recent report by Colliers India.

During 2020, flexible workspace operators leased about 2.9 million sq ft of space led by technology, and banking and financial services (BFSI) enterprises.

“Flexible workspaces are here to stay, with their share growing in the real estate pie. Though 2020 was muted for the growth of flexible workspaces, markets like Bengaluru, Hyderabad & Chennai continue to drive demand. Further, enterprises are also driven by the desire to offer locational flexibility to some of their employees and functional departments. Thus, they are leasing desks in flexible workspaces closer to the employee’s home,” said Arpit Mehrotra, managing director, Office Services (South India) at Colliers.

Despite large workforces working from home, as of March 2021, top flexible workspace operators across the top six cities have about 65% of their seats already leased, signalling continued confidence in managed workplaces.

As corporate occupiers continue to be uncertain about long-term office leasing plans in 2021 and 2022 and are still re-assessing their office space needs, they are exploring leasing desks in flexible workspaces to avoid long-term capital expenditures, and to get more flexibility on their lease terms, the report said.

“Conversations for consolidations and hybrid models continue to pick up and anchor pricing benefits are up for grabs. Leasing will pick up by H2 and it is prudent to evaluate a short-term hybrid model across regions”, said Bhupindra Singh, managing director, Regional Tenant Representation (India) at Colliers.

The total flexible workspace stock in the top six Indian cities is almost 30 million sq feet, equivalent to 4.3% of total Grade A and B commercial office stock. Bengaluru leads the tally with a 37% share of the total flexible workspace portfolio, followed by Delhi NCR and Mumbai, with 18% and 14% shares respectively.

By 2022, flexible workspace stock is likely to account for 5.4% of the total office portfolio, led by demand for well-located, high quality and efficient flexible workspaces.

The flexible workspace sector remains fragmented and is dominated by operators of various sizes in terms of number of centres and total area occupied. According to Colliers, “there is likely to be consolidation in the market, mainly through smaller fragmented operators that are facing acute cash-flow challenges ceasing operations. Over the next three years, flexible workspace operators are also likely to acquire smaller players to ensure they have the geographic range necessary to support their enterprise clients’ distributed workforce.”

As occupiers focus on portfolio optimization through 2022, many are exploring ways to shift teams into multiple, smaller managed spaces than their existing large, consolidated offices or use flexible workspaces as a stop-gap arrangement until they relocate to entirely new offices. Occupiers are also likely to take up flexible workspaces near suburban residential catchments, providing their employees more conveniences and choices. Many of these existing centres are currently operating at 50-70% occupancy levels, the report said.