In FY23, shared office space demand reaches a new high, with IT cities dominating the rankings.
Corporate demand for flexible space has driven enterprise leases of co-working facilities to 103,665 seats in FY23, a significant increase from the previous year’s 87,345 seats, largely due to softening economic conditions, as per an industry report.
The leasing of flexible seats reached a record high in FY23, experiencing 20% year-on-year growth and doubling its growth compared to FY21, according to data from Cushman & Wakefield.
The tech cities of Bengaluru, Hyderabad and Pune accounted for a significant 78% share of the flex seat leases in FY23, said the study.
To meet the increasing demand, companies including Smartworks, WeWork, Awfis, Skootr, Urban Vault, Vatika Business Centre and The Executive Centre are actively expanding their operations.
“The post pandemic transformation in occupier demand and changing workplace dynamics has paved the way for the growth of the flex space industry,” said Ramita Arora, managing director-Bengaluru and head-flex India at Cushman & Wakefield.
The share of space leased by flexible workspace providers witnessed a significant increase from 9% in FY20 to 14% in FY23. Moreover, in FY23, the uptake of operator space in the flex sector experienced a remarkable growth of 57% compared to FY20 and 76% compared to FY22.
Over the past five years, the flexible workspace industry has grown five-fold, demonstrating an impressive compound annual growth rate (CAGR) of 41%.
“The numbers strongly indicate the market’s direction, reflecting significant momentum and confidence in the flex spaces as they have become a way of life. The demand for flex is soaring given the shift in preference of both occupiers and employees,” said Harsh Binani, co-founder, Smartworks.
In a recent development, Smartworks has expanded its operations by adding new centres and securing 530,000 sq ft of office space in Noida and Gurgaon. This expansion has propelled their regional portfolio to surpass 1 million sq ft.
“Flexible office spaces offer a more cost-effective alternative, as businesses can rent only the space they need for a specific period, avoiding hefty upfront costs and long-term commitments,” said Ankit Jain, co-founder & director of Skootr.
During Q3 2022, the trend of returning to the office gained momentum across various sectors, with occupiers actively seeking workspaces to enhance their office experience.
Skootr, a workspace provider, has recorded a 10-fold increase in 2023 compared to the previous year.
“More and more companies are realising the benefits of managed office spaces that can be customised to their specific needs and provide value-added services,” said Vineet Taing, chief executive officer, Vatika Business Centre.
Bengaluru-based startup Urban Vault has announced plans for expansion to cater to the growing market.
“We added nearly 2,000 seats in the January-March quarter alone, whereas the total for the entire year of 2022 was 2,000. Our projection is to add over 7,000 seats in the fiscal year 2023-24. Alongside our ongoing expansion in Bangalore, our objective is to establish a presence in Hyderabad and Pune as well this year,” said Amal Mishra, co-founder of Urban Vault.
In the pre-pandemic era, the flexible workspace sector held an average share of below 10% in annual leasing. However, tech cities such as Bengaluru, Hyderabad and Pune consistently maintained the highest share in flex operator leasing across India. Their combined share increased from 49% in FY20 to an average of 60% during the post-pandemic period (FY22 and FY23).
“Flexible workspace in India has seen a huge surge in demand from large corporations over the last few years, with metro cities being the fastest growing markets. Companies have leaned towards flexible and agile workspace environments as a key real estate strategy to tide over uncertain times, causing phenomenal growth in the industry,” said Manish Khedia, regional managing director, South India and Sri Lanka, The Executive Centre.
In Q1 of 2023, The Executive Centre has already secured agreements for six new centres in key cities such as Bengaluru, Hyderabad, Gurgaon, New Delhi and Mumbai. This expansion has added over 200,000 sq ft to their existing portfolio.
During FY21-23, occupiers from the IT-BPM sector have consistently contributed a significant 40% share in enterprise deals, reflecting a similar trend observed in conventional commercial office leasing.