Bengaluru flex office space leasing dips over 40% in first half of this year

And in the city's IT sector, the overall leasing volume in H1 2024 by third-party IT services increased to 1.3 msf from the previous year’s 1 msf.

Flexible office space leasing dropped more than 40 percent in January-June in Bengaluru from the year-ago period, real estate consultant Knight Frank India said in a report released on July 4.

The leasing volume in the country's IT capital dropped to 1.7 million sq ft (msf) from the peak of 2.9 msf in the first half of the calendar year 2023, the report said.

"It must be noted that the drop in share looks exacerbated due to the significant base effect at play. Flex spaces continue to play a crucial role in the market providing flexibility and cost savings for sectors like third party IT services and startups," the report said.

A base effect relates to the inflation in the corresponding period of the previous year.

The so-called flex workspace is a shared office space that comes with several desk layouts, allowing customisation of the space, equipment and services according to the needs of a company. These are generally leased by corporates for monthly rent and usually have a shorter lease period than a traditional office.

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Across top 8 cities, flex space operators took up 7.2 msf in H1 2024. Flex spaces accounted for 21 percent of the total office space transacted during the period.

Co-working spaces constituted 72 percent of all flex space transacted in the first half of 2024 compared to 58 percent in the past year.

The top eight cities are Bengaluru, Mumbai, Kolkata, Chennai, Hyderabad, Pune, the National Capital Region, which includes Delhi, and Ahmedabad.

Bengaluru has the highest office space demand.

Bengaluru accounted for 24 percent of the overall office space demand in H1 2024, with a leasing of 8.4 msf, up 21 percent from the previous year. The increase can be largely attributed to the setting up of global capacity centres (GCCs) by corporates looking to expand long-term operations in the market.

GCCs emerged as the dominant end-use type of occupiers in H1 2024, contributing 47 percent to all leasing transactions of about 4 msf, up from 2 msf last year.

The report said firms such as Google, Qualcomm, ANSR, Tekion and Samsung expanded their operations in Bengaluru due to its strong technology platforms and diverse talent pool.

In the city's IT sector, the overall leasing volume by third-party IT services increased to 1.3 msf, a growth of 32 percent from the previous year.

Across the eight cities, the office sector clocked 25.1 msf of space completions in H1 2024.

The report said robust demand also helped rents firm up across all markets over the year, as all major markets without exception saw a rise in rental values.

Chennai led the pack, with a 9 percent YoY growth in rents, as demand remained robust and supply severely crunched. Bengaluru followed second, with rents up 7 percent.