Businesses in India, led by technology companies, are turning to flex space, which is typically built-to-spec office space with a shorter lease than traditional office sites, as their international counterparts put off decisions on where to rent workspaces.
Prior to the Covid-19 pandemic that caused offices to become deserted as workers shifted to working from home, the share of flex space in occupiers' total portfolio increased from 5-8 per cent in 2019 to an estimated 10-12 per cent in 2023. The majority of flexible space is occupied by technology companies.
The pandemic's drive
A hybrid working model has also brought flex spaces to the centre stage and helped occupiers in optimising costs and ensuring employee flexibility, said a report by Colliers titled Global Occupier Outlook 2023.
As the era of easy money came to an end and the war in Ukraine raged on, businesses in the West were forced to put off decisions about leasing office space due to the threat of a recession brought on by high inflation.
Flex space penetration in India was 6.5 per cent as of the first quarter of 2023 and is still growing, driven by occupiers' rapid adoption of a hybrid and decentralised work strategy in an effort to create modern workspaces at the lowest possible cost.
China to send its first civilian to space on Tuesday, says space agency
HCL Tech Q4 preview: Weak software segment to drag profit by 4-9% QoQ
Satellite imaging start-up GalaxEye Space gets $3.5 mn seed funding
Companies, startups more inclined towards coworking spaces: Anarock
First hybrid solar eclipse in a decade begins; it won't be visible in India
Govt behind on FAME target by 59% ten months before scheme closure
Top 4 IT companies see 40% drop in large client additions in FY23
Omron to establish first Indian medical devices factory in Tamil Nadu
New flights based on flyer-handling capacity at security checks: BCAS
Tamil Nadu signs business pacts worth Rs 800 crore with Japanese companies
Technology companies take the lead
According to the Colliers report, flex space penetration in other markets in the Asia Pacific region has increased only slowly, hovering between 2-4 per cent.
In India, technology occupiers currently make up over 50 per cent of the total flex space across Chennai, Delhi-National Capital Region, Pune, and Hyderabad.
Other major sectors that are actively embracing a hybrid model through flex space include engineering, manufacturing and Banking, Financial Services, and Insurance (BFSI).
The demand for flex space from BFSI and engineering tenants is almost on par with that of technology tenants in larger markets like Mumbai and Bengaluru.
Demand from technology occupiers will remain strong over the next two years, driven by a solid recovery and robust hiring plans as businesses continue to put an emphasis on cost-cutting, said the report.
In terms of how workspaces are viewed and used, the APAC region is going through a significant change. Despite ongoing difficulties, Sam Harvey-Jones, Chief Operating Officer for Asia Pacific at Colliers, and Mike Davis, Managing Director, Occupier Services, Asia Pacific, recently visited India and noted that this time of change offers unmatched chances to rethink the function of space and investigate novel strategies that take into account changing employee needs.
“Flex spaces have emerged as a core strategy for occupiers to adopt a decentralised workspace model, serving as a promising alternative to the traditional paradigm,” said Peush Jain, Managing Director, Office Services, India, at Colliers.
“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 mn sq ft across the top 6 cities, the highest in any year. This was a 46 per cent YoY increase led by prominent IT hubs such as Bengaluru and Pune,” Jain said.
In lieu of having a single, enormous central headquarters, companies are now choosing a distributed workspace strategy to guarantee convenient commutes for their staff.
Non-metro cities such as Ahmedabad, Coimbatore, Indore, Jaipur, Kochi, and Lucknow are also witnessing heightened activity in flex space.
This trend is particularly noticeable among technology, consulting, and e-commerce firms that are opening numerous satellite offices in these places, the report added.