According to an industry report, the demand for flexible workspace driven by corporate entities has led to an impressive increase in enterprise leases of co-working facilities, reaching 103,665 seats in FY23, a substantial rise from the previous year’s 87,345 seats. This surge in leasing activity marks a remarkable 20% year-on-year growth, doubling the growth rate compared to FY21, as revealed by Cushman & Wakefield’s data.
The study highlights the tech cities of Bengaluru, Hyderabad, and Pune as the primary contributors, accounting for a significant 78% share of the flexible seat leases in FY23.
To cater to the rising demand, prominent companies like Smartworks, WeWork, Awfis, Skootr, Urban Vault, Vatika Business Centre, and The Executive Centre are actively expanding their operations.
“The growth of the flex space industry has been paved by the post-pandemic transformation in occupier demand and changing workplace dynamics,” stated Ramita Arora, Managing Director-Bengaluru and Head-Flex India at Cushman & Wakefield.
The report also indicates a substantial increase in the share of space leased by flexible workspace providers, rising from 9% in FY20 to 14% in FY23. Furthermore, the uptake of operator space in the flex sector experienced remarkable growth of 57% compared to FY20 and 76% compared to FY22 in FY23.
Over the past five years, the flexible workspace industry has witnessed exponential growth, expanding five-fold with an impressive compound annual growth rate (CAGR) of 41%.
“The numbers strongly indicate the market’s direction, reflecting significant momentum and confidence in 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 of Smartworks.
In a recent development, Smartworks has expanded its operations, securing 530,000 sq ft of office space in Noida and Gurgaon, thus surpassing a regional portfolio of 1 million sq ft.
“Favorable 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,” explained Ankit Jain, Co-founder & Director of Skootr.
During Q3 2022, there was a noticeable trend of companies returning to the office across various sectors, actively seeking workspaces to enhance their office experience.
Skootr, a leading workspace provider, witnessed a ten-fold increase in 2023 compared to the previous year.
“More and more companies are realizing the benefits of managed office spaces that can be customized to their specific needs and provide value-added services,” stated Vineet Taing, Chief Executive Officer of Vatika Business Centre.
Bengaluru-based startup Urban Vault has announced plans for expansion to meet the growing market demand, aiming to add over 7,000 seats in the fiscal year 2023-24.
In the pre-pandemic era, the flexible workspace sector held an average share of below 10% in annual leasing. However, tech cities like 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 workspaces in India have experienced a surge in demand from large corporations over the last few years, with metro cities witnessing the fastest-growing markets. Companies have embraced flexible and agile workspace environments as a key real estate strategy to navigate uncertain times, leading to phenomenal growth in the industry,” explained Manish Khedia, Regional Managing Director for South India and Sri Lanka at The Executive Centre.
In Q1 of 2023, The Executive Centre has already secured agreements for six new centers 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, further catering to the rising demand.
During FY21-23, occupiers from the IT-BPM sector consistently contributed a significant 40% share in enterprise deals, reflecting a similar trend observed in conventional commercial office leasing.
The flexible workspace sector’s remarkable growth and increased corporate adoption highlight its advantages in providing flexible, customized spaces with value-added services. With the market’s direction pointing towards a continued surge in demand, the industry is set to redefine the future of workspaces in India.
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