The Covid-19 pandemic and the ensuing disruptions have improved the market potential of flex space operators as enterprises explore flexible leases and hybrid work models. A joint study by Colliers and Odesq expects co-working stock in India to surpass 60 million sq ft (MSF) by calendar year (CY) 2023 aided by rising demand from enterprises.
Demand for flex space will be largely driven by consulting, IT-BPM and e-commerce firms, who are establishing multiple satellite offices in suburban locations in metro cities. Metros remain a stronghold for flex spaces, accounting for about 88% of the total stock as of Q3 2021, the report revealed.
In India, flex spaces have been expanding in metro cities since 2017. As per Colliers, leasing of flexible spaces touched 12 MSF in CY 2019, in the top six metro cities, led by demand from large enterprises. In 2020, with the pandemic raging, flex operators took a step back by closing unprofitable centres and postponing leases.
“However, after a lull of one-and-a-half years, operators have started expanding since Q3 2021 led by enterprise-driven demand. As occupiers are looking at enhanced flexibility in their leases, we have more reason to believe that the pandemic is playing a key role in accelerating the growth of flex spaces,” the report added.
Covid also provided an opportunity to operators to open centres in non-metros. Flex space in non-metro locations is witnessing growth since early 2021, led by occupiers establishing their sales and regional offices.
Colliers CEO (India), Ramesh Nair said in a volatile economic environment, companies are re-evaluating their cost economics and assessing the shift to hybrid work plans. Reverse migration to tier-II cities, constant growth of new startups and increased occupier confidence driven by vaccination rates, have helped in overall improvement.
Odesq CEO Paras Arora pointed out that Covid has underlined the importance of commute time, decentralisation of workspace, and a hybrid and productive workspace approach. The office space segment is now future-ready (hub-spoke and work from anywhere) and the new narrative have moved from one confined option to on-demand and anywhere usage. The next 12-18 months are expected to witness businesses of all sizes reassessing the use of their office.
Flex space is also emerging in non-metro cities as large enterprises are moving to a decentralised structure, focusing on flexibility and convenience of employees.
Total flex stock in non-metro cities is likely to hit 7.8 MSF by 2023, a 50% increase from current levels. Ahmedabad, Coimbatore, Indore, Jaipur, Kochi and Lucknow are the top six emerging non-metro locations.