Apart from tier-I cities, flexible space operators are expected to compete for high-quality large-sized spaces, increasingly pre-leasing space in quality, investment-grade developments or look for semi-investment and second-generation spaces.
The overall flexible space take-up in the third quarter of 2019 stood at 2.0 million sq ft while Mumbai, Bengaluru and Hyderabad accounted for about 70 percent of the office space take-up, according to a report by CBRE South Asia Pvt Ltd titled 'India Flexible Space Digest – Q3 2019'.
Going forward, corporates are expected to increasingly adopt flexible spaces within their RE portfolios as they would progressively try to engage employees by providing multiple space options
Bengaluru dominated the flexible space stock with 7.8 million sq. ft., followed by Delhi-NCR and Mumbai, with 6.7 million sq. ft. and 4.6 million sq. ft respectively. Flexible space penetration was highest in Delhi-NCR (6.1 percent) and Bengaluru (4.6 percent), followed by Mumbai, Pune and Hyderabad at 3.7 percent, 3.8 percent and 3.5 percent, respectively, the report said.
"We expect that landlords will increasingly cater to occupier interest by providing space-as-a-service on demand. Given that the Indian flexible space market is one of the biggest across APAC, we anticipate that this segment will remain high on the investor radar as well. We thus expect flexible space leasing to be around 9 mn sq ft in 2019 and around 9-10 mn sq ft in 2020," said Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE.
The number of small- to- medium-sized deals (20,000-100,000 sq ft) rose from 49 percent in the second quarter of 2019 to 54 percent in the third quarter of 2019. However, the number of large-sized deals (exceeding 100,000 sq ft) dipped from 14 percent in the second quarter of 2019 to 12 percent in the third quarter of 2019.
"On an average, deal sizes were larger in India as compared to APAC in Q3 2019. Q3 2019 also witnessed an increased inflow of funds with about USD 100 million of funding provided by angel investors/PE funds/debt funds. Going forward, it is expected that corporates will increase the share of employees using flexible spaces, likely to be fuelled by Gen Z/millennial preferences," said Ram Chandnani, Managing Director, Advisory and Transaction Services India, CBRE.
Apart from tier-I cities, flexible space operators are expected to compete for high-quality large-sized spaces, increasingly pre-leasing space in quality, investment-grade developments or look for semi-investment and second-generation spaces.Operators are now expected to now consider newer, smaller markets as well as concentrate on improving efficiencies within the existing centres.