With economic uncertainties looming over the markets, businesses across the globe are being coerced to shelve their decisions about taking up office space, while Indian business owners are turning to flex space.
Businesses in India, led by technology companies, are turning to flex space—typically built-to-spec office space with a shorter lease than traditional office sites—as their counterparts elsewhere in the world delay decisions on renting workplaces.
The share of flex space in occupiers’ total portfolio has increased to an estimated 10–12 percent in 2023 from 5-8 percent in 2019, a year prior to the pandemic that left offices entirely barren as employees switched to working from home. Technology companies occupy half of the total flex space in India.
The Pandemic Thrust
The adoption of the hybrid work model has also pushed flex spaces to the center stage and helped occupiers in optimizing costs and ensuring employee flexibility, as a report by Colliers titled Global Occupier Outlook 2023 stated.
As the era of easy money came to an end and the war in Ukraine continued, businesses in the West were forced to delay their decisions to take up office spaces due to the risks of a recession brought on by high inflation.
As of the first quarter of 2023, the flex space penetration of India was 6.5 percent, and these numbers continue to grow, driven by occupiers’ quick adoption of a hybrid and decentralized work strategy in an effort to build ultramodern workspaces at the lowest possible costs.
Technology Companies Take the Lead
As reported by the Colliers report, other markets in the Asia Pacific region have relatively grown slower in flex space, with penetration falling within 2–4 percent.
In India, however, the flex space adoption growth has been quicker, with technology occupiers currently making up over 50 percent of the total flex space across Chennai, Delhi-National Capital Region, Pune, and Hyderabad.
It is not just the technology companies in India but also other major sectors such as engineering, manufacturing and Banking, Financial, Services, and Insurance (BFSI) that are also actively embracing the hybrid work model through flex space.
In larger markets such as Mumbai and Bengaluru, the demand for flexible space by BFSI and engineering tenants is almost on par with that of technology tenants.
For instance, the leading global investment banking, securities, and investment management firm, Goldman Sachs, has its investment banking operations in Mumbai. Financial service provider JP Morgan and payment gateway service Visa have taken up large lease areas in Bengaluru, with the former taking up office space in Embassy Tech Village and the latter expanding their office space with property dealer Bagmane.
The report by Colliers also mentioned that the demand from technology occupiers will continue to remain strong in the next two years, led by a strong recovery and robust hiring plans as businesses continue to focus on rationalizing costs.
The APAC region is witnessing a significant change in terms of how workspaces are being viewed and used.
During their recent visit to India, Sam Harvey-Jones, Chief Operating Officer, of Asia Pacific, and Mike Davis, Managing Director, of Occupier Services, Asia Pacific, at Colliers also mentioned how the APAC region was undergoing a significant transformation in the way workspaces were perceived and utilized. And though challenges still persist, the changing period offers unmatched opportunities to rethink the role of space and explore new approaches that cater to the evolving needs of today’s employees.
As stated by Peush Jain, Managing Director, Office Services, India, at Collier’s, flex spaces have emerged as a core strategy for occupiers to adopt a decentralized workspace model, serving as a promising alternative to the traditional paradigm.
As compared to shorter lease tenures of 1-2 years pre-pandemic, occupiers are now going for longer commitments of 3-5 years with flex space operators as they look to integrate flex space as a long-term solution. During 2022, leasing by flex space operators touched 7 million square feet across the top six cities, the highest in any year. This was a 46-percent YoY increase led by prominent IT hubs such as Bengaluru and Pune.
The new-age companies are now opting for a distributed workspace system to ensure convenient commutes for their employees, in place of having one large central headquarters branch.
Metropolitan cities such as Ahmedabad, Coimbatore, Indore, Jaipur, Kochi, and Lucknow are also witnessing heightened activity in flex space.
The report also suggested that this trend is prominent among technology, consulting, and e-commerce companies that are establishing multiple satellite offices in these locations.
Flex spaces, the alternate workspaces to the past’s conventional office spaces, are well-liked by the present-day workforce, especially because of the numerous benefits they have to offer, including but not limited to the freedom to work from anywhere, anytime, and the flexibility to choose their work schedule combined with best-in-class amenities, a conducive work environment, and a better work-life balance.
Following the workspace trends in India, people will continue to opt for these flexible spaces, like coworking spaces and shared offices, over their traditional counterparts.
And this is just the beginning; as the number of flexible workspace providers continues to increase, the easy accessibility to these popular flex spaces will also drive up the numbers in the country over the coming years.