With work-from-home being gradually moderated and many employees still preferring to work closer to home or stay back in their hometowns, flex spaces have gained traction, especially among start-ups. The total flexible space leased by flex operators in the 18-month period from January 2021 to June 2022 stood at 8.8 million sq. ft, which is over 63 percent of the total space leased in the preceding two years, a new report has said.
During the same period, the share of managed and hybrid operators in flex leasing also increased from 79 percent to 87 percent, according to a JLL-CoWrks report titled ‘The age of flex: Creating future-ready workplaces’.
There has been a pickup in demand for flex spaces also because it allows firms to plan their CAPEX well, the report said.
Among domestic firms, startups accounted for a 42.4 percent share of seats leased among domestic firms. Bengaluru took up the maximum number of flexible work spaces followed by Delhi NCR and Hyderabad in startup activity in flex spaces, it said.
The first half of 2022 saw the flex segment receiving prominence in the occupier space strategies. As such, the share of flex in leasing activity rose to 20.4 percent, the highest to date. In fact, flex leased 2.8 million sq. ft in Q2 2022, the highest in three years and the H1 2022 numbers are already 30 percent higher than the annual flex space take-up for both 2020 and 2021 individually.
The total flex stock across the top seven cities (Bengaluru, Delhi NCR, Mumbai, Pune, Chennai, Hyderabad, and Kolkata) in India stood at 43.36 million sq. ft at the end of H1 2022. This represents a growth of 690 percent over the past six years from 6.3 million sq. ft in 2016. Bengaluru is the clear leader with 36 percent of the total flex stock in the country at 15.74 million sq. ft, the report said.
In seat terms, these seven cities have around 679,760 operational seats with as high as 82 percent of them located in New Business Districts - office corridors that have emerged over the past two decades and now account for the bulk of occupier activity. The rest of the seats are in the Central Business Districts (CBDs) with peripheral markets having a limited presence.
The penetration of flex stock in overall office stock has gone up from 3 percent in 2020 to 3.9 percent as of June 2022. India’s flex penetration level is expected to go up to 4.5-5 percent over the next five years to reach the current levels of mature markets across EMEA and the USA. Given the projected penetration levels and previous growth trends, flex stock is expected to reach around 75 million sq ft by 2025.
Large operators with over 5,000 seats under management, and big operators with 3,000 to 5,000 seats under management today, have exhibited an 11X growth from 2016 till H1 2022 in terms of their portfolio size and hold a cumulative 81 percent share of the operational seats. A change in workplace strategies especially during the COVID period has seen large enterprises consider workplaces as a key tool to drive business and empower their employees.
As many as 65,171 seats were leased by enterprises in the first half of 2022, which is already 54 percent of the total seats leased (121,000) during 2020 and 2021. In fact, in the last 18 months, more than half of the enterprise leases are of a large size comprising over 1,000 seats per deal.
“Domestic firms have seen a faster adoption of flex space with their share rising from 35 percent in 2019 to 46 percent during the first half of 2022. There is a clear shift in occupier preferences, with the share of non-tech firms rising significantly in the flex ecosystem from 33 percent in 2019 to 43 percent in 2021. It stands at 40 percent in H1 2022,” said Samantak Das, Head of Research and REIS, India, JLL.
“Delhi NCR and Bengaluru led the way in enterprise seat leasing in the price bracket of Rs 15,001 to Rs 20,000 per seat per month over the last 18 months. With most corporates welcoming back their employees back to the office, demand for office space has already seen a spurt in the first half of 2022. At the same time, we are also witnessing a pickup of demand for flex spaces as it allows firms to plan their CAPEX well while giving their employees the flexibility of working from a managed work environment,” he added.
"With H1 2022 numbers displaying a 30 percent increase higher than the annual flex space take-up for both 2020 and 2021 individually, the segment is ready for a quantum leap and is anticipated to nearly double itself over the next five years,” said Parul Thakur, Senior Vice-President, Business Head, CoWrks.
The total flex seats leased in H1 2022 stood at 65,171, which is 75 percent of the total seats leased in 2021. Of these, the four cities of Bengaluru, Hyderabad, Delhi NCR, and Pune together make up approximately 73 percent of enterprise activity in the flex market.
Customisation is a key ask from occupiers
In the current scenario, the most dominant offering is a per-seat cost of up to Rs 10,000 per month. Growth, however, lies in the price segments of Rs 10,000 to 20,000 per seat per month range. Over the last six years, the growth rate of flex seats in the range of Rs 12,000 to Rs 18,000 per seat per month crossed 9X, which is nearly at par with the growth rate of the seats in the lower price range (10X). This goes on to signify that occupiers are demanding more customisation and are willing to pay a premium for such spaces at centrally located flex centres. This is despite affordability being central to occupiers’ plans of opting for flex space options, the report said.
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