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New Office Formats Gaining Ground

Flexible space and Coworking space are the new formats of offices that are gaining steam across the country. While the former offers managed space for one company with customised amenities, the latter provides shared space for smaller companies with common facilities.

The flexible space take-up in the country has reached about 4.6 million sft in H1 2019. During the period, Bengaluru accounted for almost 30% of the leasing by flexible space operators. The stock exceeded 20 million sft, according to realty consulting firm CBRE South Asia. This consistent growth in the country was a result of operators leasing medium to large-sized spaces across cities, CBRE finds in its latest report ‘India Flexible Space Digest – H1 2019’.

Co-working“India is currently one of the leading flexible space markets in APAC, and we expect increasing investments in this segment going forward. Office stock is expected to grow from 600 million sft in mid-2019 to a billion sft by the end of 2030, and flexible space will comprise 8-10% of the total office stock,” says Anshuman Magazine, chairman & CEO, India, South East Asia, Middle East and Africa at CBRE.

The number of small-to medium-sized deals (20,000 – 100,000 sft) rose from 52% in H1 2018 to 61% in H1 2019. Moreover, the number of large-sized deals (exceeding 100,000 sft) increased from 6% to 13% y-o-y in H1 2019, he adds.

Ram Chandnani, managing director, advisory and transaction services India, CBRE, says, “Customised enterprise solutions provided by operators offer a competitive advantage as well as enable them to retain tenants for a longer-term. This is expected to continue to attract established corporates towards the flexible space segment.”

Also riding the popularity wave is coworking space. An analysis of leasing trends in the top seven cities in India in the report by JLL and FICCI – Coworking: Reshaping Indian Workplaces – reflects the rising proportion of mainstream corporates and established entities from different sectors in the total coworking space leased.

Ramesh Nair, CEO & country head, JLL India says, “Space taken up by the coworking segment doubled to 3.9 million sft in 2018 compared with 2017. Cumulative space taken-up by coworking segment from 2017 to 1Q19 is 6.9 million sft. There is more, the coworking share in office leasing in the top seven cities of India increased from 5% (2017) to 8% (2018), and this moved up further to 12% in 1Q2019.”

Besides, investments have been pouring into the coworking space. According to JLL estimates, at the end of May 2018, close to $400 million were invested in coworking space. The trend has continued until now.


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Interestingly, Nair points out, coworking spaces are not only playing an important role in office leasing markets but also supporting the growth of startups and enabling accelerator programs which help them grow. While coworking spaces are catering to the requirements of large enterprises, they are also providing startups and SMEs a well-structured office space from where they can work and grow. “For instance, coworking player Incuspaze recently announced its collaboration with Small Industries Development Bank of India (SIDBI) to support micro and small enterprises (MSEs) and startups with a well-managed space to meet their office requirements. While Incuspaze will develop and operate the coworking space, SIDBI will provide support to the startups to grow further,” he explains.

 

Presenting the outlook for flexible space, CBRE’s Anshuman Magazine says that operators will continue taking up large-sized spaces exceeding 1,00,000 sft across cities, moving beyond the top cities to cover other major markets and tier-II cities. “This will continue to strengthen the overall space take-up. Also, the continuously increasing demand for space in non-core micro-markets, coupled with a paucity of space in core micro-markets, is likely to result in the former dominating leasing in the future. We also expect the demand for managed office spaces will strengthen in the coming few quarters and become almost comparable to that of hybrid spaces. Moreover, we anticipate this segment will remain high on the investors’ radar.”

JLL’s Nair also paints a bright picture for coworking space as he observes that they have found new growth engines by moving beyond their initial role of acting as providers of flexible, vibrant workspaces. “Today, they are acting as business enablers for startups as well as large corporate,” he quips.


Also Read: Workspaces Impact Employees’ Physical, Mental, Emotional Health


 

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