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Flexible workspaces to lease 3 million square feet of space in 2021: Colliers
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GURUGRAM, India, March 19, 2021 /PRNewswire/ -- During 2021, flexible workspace operators are likely to lease about 3 million square feet 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. During 2020, flexible workspace operators leased about 2.9 million square feet 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.

"Managed office is the buzz word in a market that is not so active for now. For the medium term, corporates are watching the impact of the vaccines closely. Many organisations have opened their offices and the access is left to the personal comfort of the employee. We have seen rising activity in the F&B areas of large office complexes, looking optimistic for sure. 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.

"Flexible workspace operators are looking for acquisition of properties with the backing of an end-user. The margins of all flexible workspace that were acquired pre-Covid are under stress. There is a clear shift in the risk-taking abilities of these business enterprises,"  said Sangram Tanwar, Managing Director, Office Services, Mumbai at Colliers.

The flexible workspace sector remains fragmented and is dominated by operators of various sizes in terms of number of centres and total area occupied. However, the top five operators in India currently operate nearly half of the total area occupied by flexible workspace operators in the Indian market. 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.  

"Pune has been at the forefront when it comes to large occupiers looking at flexible workplace solutions and is witnessing huge demand levels. Many occupiers are preferring flexible workplaces over conventional ones owing to cost advantages, scalability and adjustable solutions bringing liquidity in an occupiers real estate cycle and enhancing space optimization," said Animesh Tripathi, Senior Director, Office Services, Pune at Colliers.

From an occupier perspective, 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 their employees' homes to provide ease of access and flexible work hours. During 2021, technology companies are likely to be at the forefront of demand, followed by BFSI and consulting companies, with demand from such companies to increase from the latter half of 2021.  

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.

Siddhart Goel, Senior Director & Head of Research at Colliers India added, "Enterprises are looking for shorter leases for about one to two years, with more flexibility on lease terms to tide over uncertain times, which they get in a flexible workspace. We are seeing increasing interest from corporate occupiers in flexible workspace leases, which shows that there is adequate confidence in this space, and we expect demand to increase for well managed spaces that focus on digital workplace infrastructure and wellness. Over the next two years, the market is likely to see newer models evolving in this space, especially on the managed office front."

To  download the full report, please visit:  https://www.colliers.com/en-in/research/flexible-workspaces-2021

About Colliers

Colliers (NASDAQ: CIGI) (TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 67 countries, our more than 15,000 enterprising professionals work collaboratively to provide expert advice to real estate occupiers, owners and investors. For more than 25 years, our experienced leadership with significant insider ownership has delivered compound annual investment returns of almost 20% for shareholders. With annualized revenues of $3.0 billion ($3.3 billion including affiliates) and $40 billion of assets under management, we maximize the potential of property and accelerate the success of our clients and our people.  

Media Contact:

Sukanya Dasgupta
Associate Director & Head, India Marketing & Communications
Sukanya.dasgupta@colliers.com
+91-9811867682/ 8826377335

 

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