Flex office spaces major game changers for commercial sector in Bengaluru, but to grow cautiously

The reason for this optimism is the fact that the flex office segment has evolved as the big driver and is altering the office sector dynamics.

Colliers data suggested that Bengaluru added 50,000 seats last year and 12,500 between January and March 2023, thus growing at a stable rate.

Data from Knight Frank shows that during 2019, 2020 and 2021, Bengaluru saw 2.3 msf, 1.6 msf, and 2.4 msf of co-working space transactions, respectively.

Why are industry giants opting for flex spaces?

The pandemic almost tripled the flex office space portfolio across India. With companies aggressively cutting budgets, not having a dedicated office made sense.

Ram Chandnani, managing director, advisory and transactions services, CBRE, said flex office space includes co-working and also managed office spaces or enterprise solutions where the operators customise the entire office space for clients. "Post-pandemic, flex has spurred an array of customised solutions for companies which also allow them to scale across cities with low-risk investments," he added.

Additionally, companies say the flexibility offered by co-working and managed office spaces has allowed them to strategically restructure their portfolios, especially given high land and construction cost across CBD and prime locations, allowing them to diversify, for example with the IT team in the outskirts, thus saving on costs.

While CBD areas, including Indiranagar and Koramangala, remain top choices for flex spaces in Bengaluru, the Colliers report mentioned an uptick in major suburbs like Whitefield and Outer Ring Road in the first quarter of 2023.

Post-pandemic, the underlying forces of the office space sector have gradually shifted to an employee-driven market. This was borne out by the large-scale resignation of the female workforce after Tata Consultancy Services announced the end of work-from-home a few weeks back.

This has slowly brought in a cultural shift that we perceive today putting more focus on hybrid solutions, said P S Aditya, chairperson of Corporates in Real Estate, an umbrella body for the commercial real estate sector in South India.

Flex to grow cautiously

While the Grade A office space rentals in the city are expected to increase over the next two quarters due to soaring land and construction cost, consultants say the leasing cost for co-working will largely remain stable or increase marginally.

Jayendra Krishna, founding manager at Trirock Estates, said, "The cost per seat in Bengaluru is between Rs 6,000 and 25,000 per seat with the sweet spot at the Rs 10,000-12,000 mark," he added.

The return of outsourcing to Indian shores in the wake of the global slowdown is also boosting the co-working sector across cities. Experts estimate that flex offices will cross 14 percent share of the entire office portfolio by the end of the fiscal, but at a steady pace.

Shesh Rao Paplikar, founder of flex workspace provider BHIVE, said, "We are taking cautious steps ahead for our new launches. Already, the signing of large-ticket deals (1,000 seats or more) has reduced in the market. The sector will grow gradually compared to the post-pandemic boom."

However, Juggy Marwaha, former CEO of WeWork India and current CEO of Prestige Office Ventures, believes that once the global recessionary market stabilises, and companies are back in business, occupiers will be looking for their own Grade A spaces.

"Previously, operators were taking speculative spaces and waiting for clients to occupy them, thus bleeding capital resources. Today, they are making informed decisions about strategic space take-ups. The slowdown can be explained as an outcome of this correction," said Arpit Mehrotra, Managing Director, Office Services, South India & Head of Flex, India at Colliers.