Bengaluru leads the flex space stock in the country at 10.6 million sq. ft and the demand for flexible spaces in large cities is likely to grow with businesses having a greater need for such spaces to accommodate portfolio expansion and contraction along with crisis support to flex their space needs as necessary, according to JLL report - Reimagine Flexspaces A 360⁰ view.
Bengaluru and Delhi NCR together account for more than half of the flex space stock in India.
The city also has a higher penetration of flex space in the country at 4.8% as compared to the national average of 3%. Market penetration basically represents flex space as a proportion of total office stock.
The densification trend that had emerged over the last decade will likely reverse with enterprises leaning on flexible office space to relax space density. Large enterprises might also look at splitting up their offices to reduce commute times and dependence on public transport. However, with expected economic uncertainty, companies will be hesitant to commit large capital to real estate.
Flexible workplaces will continue to be a major influence on the future direction of the Indian office market. There will be an even greater focus on providing customized office space solutions and demand for flexible space will not only return but increase, as occupiers embrace the core plus flex model more widely.
“Bengaluru has one of the best ecosystems for the development and evolution of flex spaces in the country. Therefore, it is no wonder that, today, the city almost leads in flex space absorption owing to its large numbers of startups and IT/ITES companies, “said Rahul Arora, Managing Director, Bengaluru, JLL.
The country is expected to witness deeper penetration, throughout 2021 and beyond, the flex space market is forecast to grow at a slower pace and more organically. Irrespective of several short-term disruptions and challenges, increased demand from large enterprises, will support the growth of the flex space market to more than 50 million sq. ft. by 2023.
It is anticipated that flexible space will grow by an average of around 15-20% per annum over the next three-to-four years, although this trajectory will not be linear. Previously expected levels of new investment are unlikely to be seen, as operators look to solidify their existing operations and it is likely that certain operators will not be able to weather the storm, the report said.
As corporates return to the workplace, they are likely to further leverage flexible space to reduce capital expenditure and create cost savings, while allowing for split teams and de-densification requirements. Developments that initially drove the growth of the flex market, like the focus on utilizing workplaces to boost productivity and drive dynamic work cultures, enhance emphasis on employee health etc., will continue to influence the next phase in India.
“While the flex-space market more than tripled in the last three years, the momentum going ahead will be relatively slower. Players are likely to tread cautiously, and the overall market is expected to expand 1.5 times from the current size. At the same time, demand for flexible space is likely to remain resilient and we expect the size of the flex space market to cross 50 mn sq. ft. by 2023 led by increased demand from larger enterprises,” Samantak Das, Chief Economist and Head of Research & REIS, JLL India.