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Coworking On A New High 

Torbit - September 18, 2022 - - 0 |

Coworking has emerged as a prime alternate asset class . With its share in total office space absorption, going up from 6 percent in 2021 to  20 percent in H1 2022, it is today a strong demand driver of commercial office real estate.  

Demand  for flexible office spaces has hit an all time  new high , post the pandemic, with major companies and businesses including start-ups now opting for co-working. Latest Anarock data reveals that out of a net absorption of approximately . 20.8 million  sq. ft. across the top 7 cities in H1 2022, the share of co-working spaces stood at 20%. Back in H1 2021, its share was just 6% of net office absorption of nearly. 9.33 million sq. ft. 

In contrast, the share of IT/ITeS sector – India’s leading office demand driver  declined from 49% in H1 2021 to 36% in H2 2022. However, this decline is largely because of the reason that  many IT companies are now also preferring flexible spaces to regular office spaces. 

In terms of net absorption across the top 7 cities in H1 2022, Bengaluru and Hyderabad remained on top, comprising 50% of total demand share.Bengaluru, Hyderabad and Chennai – the top Southern cities , together witnessed net office absorption of about 12.2 million sq. ft. Of this, 18% or nearly. 2.23 Mn sq. ft. was by coworking players.Western markets of MMR and Pune saw net absorption of nearly 5.45 million sq. ft. Of this, 27% or about. 1.5 million sq. ft. was by coworking players.In NCR it stood at approximately. 2.75 million sq. ft. Of this, 15% or nearly. 0.41 million sq. ft. was by coworking players.In Kolkata, merely 0.4 million sq. ft. office space was absorbed. Of this, 14% or approx. 0.06 Mn sq. ft. was by coworking players. 

According to Anuj Puri, Chairman Anarock Group, Coworking has received a major boost after Covid-19 disrupted the previous status quo. A major factor driving demand is that these spaces are not concentrated in just the city centres or major employment hubs.Instead  they’re spread across different areas, including the housing-intense suburbs. Coworking spaces are now also operating out of malls and hotels across cities. Many large office parks are also housing coworking spaces. This helps companies to remain closer to their employees and offer them flexibility. 

Another advantage is that with flexible office spaces, companies can plug-and-play at the same cost rather than wrestling with office layouts and fit-outs. The lock-in period for taking up a regular office space is anywhere between 3-4 years. All these factors have also helped boost the demand for co-working spaces. 

 

Cities   Net Absorption across cities in H1 2022 

(in Mn sq. ft.) 

% Share of Coworking in each City 
NCR  2.75  15% 
MMR  2.9  11% 
Bangalore  6.1  23% 
Pune  2.55  45% 
Hyderabad  4.25  13% 
Chennai  1.85  15% 
Kolkata  0.4  14% 
Total  20.8  20% 

Source: ANAROCK Research 

 

 

Office Rentals 

Backed by rising office space demand, average monthly office rentals are also seen to be rising across the top cities.NCR and Hyderabad each saw a 5% rise in average  monthly office rentals in H1 2022 ,compared to same period in 2021. Currently, the average. monthly office rents in NCR are at INR 80 per sq. ft. while in Hyderabad it is INR 60 per sq. ft.Bengaluru and Pune each saw a 4% yearly rise. The average. monthly rentals in these IT hubs by the end of H1 2022 stood at INR 81 per sq. ft and INR 72 per sq. ft., respectively.MMR, Chennai and Kolkata witnessed a 2% rise each in average. monthly rentals in this period. In MMR, the average. office rentals are the highest among the top 7 cities at INR 128 per sq. ft.; in Chennai they are INR 61 per sq. ft., and Kolkata has the lowest at INR 53 per sq. ft. 

 

Office Rental (INR/Sqft/Month) 
City  H1 2022  H1 2021 
Bangalore  81  78 
MMR  128  125 
NCR  80  76 
Chennai  61  60 
Hyderabad  60  57 
Pune  72  69 
Kolkata  53  52 

Source: ANAROCK Research 

Meanwhile, the top 7 cities also witnessed robust new office supply in H1 2022, aggregating to 31.8 Mn sq. ft. Bengaluru, Hyderabad and Pune dominated with a total 74% share. Given the high new completions, average vacancy levels across top 7 cities rose by 2% to stand at 15.95% in H1 2022. 

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