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Flex Spaces-Key to Expansion for Majority of Occupiers

Torbit - September 16, 2024 - - 0 |

Large corporations are increasingly embedding flex space as a part of their real estate footprint and over 80 percent of occupiers plan to expand through flex spaces in the next 3-5 years.

Reimagination of the workplace, changing perceptions and enterprise-level offerings have been driving heightened flex adoption in recent years. These sentiments are echoed in the latest survey-based report of Colliers India, ‘Flex Spaces: Reshaping the New-Age India Office Market’ The report highlights that over three-fourths of occupiers prefer to expand their office portfolio through flex spaces in the next few years. This trend of higher flex space adoption is mainly led by its inherent advantage of adding flexibility to the real estate portfolio while providing sufficient room to manage costs. Benefits relating to enhanced productivity, spaces replete with tech & security features and sustainability only strengthen its business case. The growth in flex space endorsement is expected to be highest amongst multi-national companies (MNCs), with an anticipated 3-4X times rise from current levels by 2030.

With a significant rise in the share of flex spaces in Grade A office space demand and changing occupier preferences, flex spaces have solidified their position in the Indian office market. As occupiers disclose their future portfolio expansion plans, the survey trends in the report are indicative of a high growth trajectory for flex spaces in India in the coming years. For the purpose of this report, the survey spanned a varied spectrum of start-ups, MNCs and GCCs targeting senior management personnel including key decision makers in the areas of real estate, administration, corporate strategy, etc.

Key Findings

  • About 60 percent of occupiers to have over 20 percent share of flex spaces in their office portfolios in the next few years. Moreover, about 30 percent of occupiers prefer to have more than 40 percent share.
  • Over 80 percent of occupiers to expand their office portfolios through the adoption of flex spaces in the next few years
  • About 60 percent of occupiers opine flex spaces are complementing real estate requirements, increasing flexibility and scalability of operations
  • About 40 percent of occupiers envisage flex spaces as centers of core business operations
  • As many as 77 percent of occupiers prefer relatively longer lease periods of more than one year.
  • 45 percent of occupiers prefer core areas of major cities for office portfolio expansion

Source: Colliers

“With flex space offerings transforming from niche to mainstream, they are expected to increasingly define the contours of Grade A office space demand in India. As per the report, 60 percent occupiers are likely to have a flex share of 20 percent or more in their office portfolio over the course of next 3-5 years, up from the present 40 percent . Earlier flex spaces were predominantly occupied by start-ups. However, over the next few years, more than two-thirds of real estate expansion across occupier segments will be through flex spaces. Notably, over 80 percent of the expansion in technology, engineering & manufacturing and healthcare sectors, would be through flex spaces “, says Arpit Mehrotra , Managing Director, Office Services, Colliers India.

Flex Spaces at the centre of core business operations

Flex spaces are now being repurposed and fulfilling roles beyond support centres. With both cost arbitrage and enterprise-level offerings coming into play, occupiers are increasingly embracing flex spaces for their core business operations. About 45 percent and 35 percent of mid and large sized companies respectively are carrying out their core business operations in flex spaces. Notably, with increasing technology adeptness in flex spaces, about 40 percent of the technology sector occupiers are using flex spaces for core business operations.

“Workspaces have steadily evolved to become centres for collaboration, innovation, wellbeing etc. and flex spaces provide holistic solutions for the new-age workspace. With maturity of flex space market and enterprise-level services on offer, occupiers are amenable with relatively longer commitment periods as well. About three-fourths of the surveyed occupiers, including MNCs and large domestic occupiers, feel positively inclined for relatively longer commitment periods. Over the next few years, average commitment period for flex spaces can potentially reach close to 3 years, a significant increase from the typical lease agreements of less than a year in the pre-pandemic period. “said Vimal Nadar, Senior Director & Head of Research, Colliers India

Preference for central areas in major cities

Location continues to be of significant importance to occupiers, with about 60 percent respondents considering it as the most important parameter for expansion. Interestingly, while expanding, occupiers are likely to lean towards flex spaces with attractive offerings in central areas as compared to facilities in peripheral areas. Going ahead, about 45 percent of surveyed occupiers would opt for future expansion through flex spaces in CBD/SBD locations of tier I or tier II cities. In terms of work-place strategy, flex spaces are likley to champion distributed work models. About half of the larger companies including Global Capability Centers (GCCs) and MNCs envisage flex spaces to act as both hub and spoke offices in the next few years.

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