Over 80% Occupiers Plan to Expand through Flex Spaces in 3-5 Years: Colliers India Report

Bengaluru / September 7, 2024: The Indian office market is witnessing a significant shift towards flexible workspaces, driven by changing workplace perceptions and the emergence of innovative enterprise-level offerings, reveals a new report, “Flex Spaces: Reshaping the New-Age India Office Market,” by investment management company Colliers India.

The report highlights over 80% occupiers plan to expand their office portfolios through flexible workspaces in the near future. Notably, large corporations are increasingly incorporating flexible spaces into their real estate strategies. The report forecasts that the adoption of flexible workspaces will be particularly high among multinational companies (MNCs), with a projected 3-4 times increase from current levels by 2030.

The report highlights the growing prominence of flexible workspaces in the Indian office market, driven by increased demand and changing occupier preferences. Based on survey responses from a diverse range of organizations, including startups, MNCs, and GCCs, the report indicates a strong growth trajectory for flexible workspaces in India in the coming years.

Key Survey Results 

“With flex space offerings transforming from niche to mainstream, they are expected to increasingly define the contours of Grade A office space demand in India. As per the report, 60% occupiers are likely to have a flex share of 20% or more in their office portfolio over the course of next 3-5 years, up from the present 40%. Earlier flex spaces were predominantly occupied by start-ups. However, over the next few years, more than two-thirds of real estate expansion across occupier segments will be through flex spaces. Notably, over 80% of the expansion in technology, engineering & manufacturing and healthcare sectors, would be through flex spaces,” says Arpit Mehrotra, Managing Director, Office Services, Colliers India.

Flex spaces emerging as centres of core business operations

The report indicates flex spaces are now being repurposed and fulfilling roles beyond support centres. With both cost arbitrage and enterprise-level offerings coming into play, occupiers are increasingly embracing flex spaces for their core business operations. About 45% and 35% of mid and large sized companies respectively are carrying out their core business operations in flex spaces. Notably, with increasing technology adeptness in flex spaces, about 40% of the technology sector occupiers are using flex spaces for core business operations.

“Workspaces have steadily evolved to become centres for collaboration, innovation, wellbeing etc. and flex spaces provide holistic solutions for the new-age workspace. With maturity of flex space market and enterprise-level services on offer, occupiers are amenable with relatively longer commitment periods as well. About three-fourths of the surveyed occupiers, including MNCs and large domestic occupiers, feel positively inclined for relatively longer commitment periods. Over the next few years, average commitment period for flex spaces can potentially reach close to 3 years, a significant increase from the typical lease agreements of less than a year in the pre-pandemic period,” said Vimal Nadar, Senior Director & Head of Research, Colliers India.

Core areas of major cities continue to be the preferred areas for portfolio expansion

The report further reveals that location continues to be of significant importance to occupiers, with about 60% respondents considering it as the most important parameter for expansion. Interestingly, while expanding, occupiers are likely to lean towards flex spaces with attractive offerings in central areas as compared to facilities in peripheral areas. Going ahead, about 45% of surveyed occupiers would opt for future expansion through flex spaces in CBD/SBD locations of tier I or tier II cities. In terms of work-place strategy, flex spaces are likley to champion distributed work models. About half of the larger companies including Global Capability Centers (GCCs) and MNCs envisage flex spaces to act as both hub and spoke offices in the next few years.