Occupancy levels of flexible workspaces are well over 80% in all major office markets of India. The occupancy levels remain at 94% in Mumbai , 92% in Delhi NCR, 86% in Bengaluru, and 84% in Hyderabad.
Flexible office space operators leased a total of 7.17 million square feet (msf) in the first half of 2024, a 6% increase compared with H1 2023, according to a report released by property consultancy Knight Frank India on September 25.
The report stated that flex workspaces continue to attract corporations, driving greater demand for flexible office spaces. To meet this rising demand, flex-space operators have increased their office space take-up, leasing an estimated 52.9 million square feet between 2017 – H1 2024, with a robust CAGR of 22%, it added.
Also Read: Office buildings in Mumbai’s Bandra Kurla Complex command higher prices than Manhattan
The total flex space leased in the first half of 2024 accounted for over 21% of the total commercial real estate transactions, highlighting the rising demand for flexible workspaces, the report said.
IT sector dominates flex workspaces
According to the report, the Information Technology (IT) sector dominates the flex space industry, driven by the need for scalability, flexible lease terms, and a collaborative environment fostering innovation, particularly in tech hubs like Pune, Hyderabad, and Bengaluru. The other services sector, including professional services, digital marketing, tourism, and creative industries, also has a strong presence in cities like Chennai and NCR.
Also Read: Office market touches 34.7 mn sq ft transactions in H1 2024; may double by year end on the back of demand from IT firms
The Banking and financial sector (BFSI) sector, while less dominant, favours flex spaces in financial hubs like Ahmedabad and Mumbai, per the report. Meanwhile manufacturing firms are increasingly utilizing flexible workspaces for their administrative and managerial operations, particularly in cities with a strong industrial base, the report stated.
Tier-2 cities expansion on cards
As part of the study, Knight Frank assessed the future readiness of the flexible workspace sector, capturing data from operators managing approximately 2,76,000 seats across various cities.
As per the survey by Knight Frank India, flex space operators plan to expand in the next two to three years.
Also Read: Bengaluru leads in large office space leasing, transaction volumes touch 4.5 mn sq ft in H1 2024
Survey participants indicated their intentions to expand not only in Tier 1 cities, but also in Tier 2 cities. NCR and Bengaluru are the top choices amid Tier 1 cities, while Coimbatore, Jaipur, Nagpur, and Mysuru are the top picks within Tier 2 cities.
The sustained increase in office transactions and the rising share of flex spaces as a percentage of the office space market indicate steady and calibrated growth of the industry, the report said.