Start-ups account for almost ⅓ flex place adoption, second only to technology sector

• Space taken up by enterprises, when measured on a per seat basis, has grown by 3.2 times from FY2021 to FY2023, reaching an all-time high.
  
• Since 2018, Bengaluru has consistently been at the forefront of the flexible office space market, commanding an average share of around 39%.
  
• From FY2021 to FY2023, Bengaluru, Pune, Delhi NCR, and Mumbai emerged as the leading cities for large flexible office space deals.
  

India's operational flexible office space (flex stock) is expected to double in size to reach 106 million sq ft over the next five years. Currently, the country's operational flex stock stands at 53 million sq ft, spread across the top seven cities, providing about 839,250 seats. This translates to an overall office stock penetration level of about 4.7%, according to a report by real estate services firm JLL, and managed and flex space provider Smartworks.

Enterprises across scales, and industry segments are increasingly incorporating flexible office spaces into their portfolios. The space taken up by enterprises, when measured on a per-seat basis, has grown by 3.2 times from FY2021 to FY2023, reaching an all-time high.

Additionally, the enterprise seat uptake in FY2023 has surpassed the combined numbers from FY2021 and FY2022, indicating a significant rise in demand for flexible office solutions. Among the top cities, Bengaluru, Pune, and Delhi NCR have emerged as the three dominant markets in the past three financial years, jointly accounting for around 60% of all enterprise seats taken up during that period.

Start-ups make a beeline for flex space

Between FY2021 and FY2023, Indian start-ups have shown a significant increase in leasing flexible office spaces, second only to the technology sector. Their share has surged to a noteworthy 31% in FY2023, making it the second-highest for the past two financial years. The start-up ecosystem in India is increasingly adopting flexible office solutions as these offer the perfect balance of cost-effectiveness, convenient locations, and flexible lease terms, while also creating modern and flagship workplaces for their employees.

Start-ups from diverse sectors, including manufacturing/industrial, banking, financial services & insurance (BFSI), and consulting, are now embracing flexible office formats in a big way.

Bengaluru on top, while Pune and Hyderabad surpass Mumbai

Since 2018, Bengaluru has consistently been at the forefront of the flexible office space market, commanding an average share of around 39%. Following closely is Delhi NCR with an average share of approximately 17%. In the same period, Hyderabad and Pune have surpassed Mumbai to become the cities with the next highest flex stock among the top 7 cities. Pune experienced the highest compounded annual growth rate (CAGR) of 49% since 2018, closely followed by Hyderabad at 40%.

Chennai and Delhi NCR also demonstrated substantial growth with a CAGR of 30% each during the same period. These figures highlight the shifting dynamics in the flexible office space sector, with certain cities witnessing significant expansion and increased adoption of flexible workspace solutions.

Large flex spaces with over 500 seats most in demand

In the period from FY2021 to FY2023, Bengaluru, Pune, Delhi NCR, and Mumbai emerged as the leading cities for large flexible office space deals, with a combined share of 75-80% for deals comprising more than 500 seats. The demand for larger, managed solutions from large enterprises is evident, as enterprise deals with over 500 seats hold the highest share among all deal size segments.

On the other hand, for smaller deal sizes of less than 100 seats, Delhi NCR and Chennai dominated the market, capturing a combined share of 55-60% during the same period. This trend indicates that smaller businesses or organisations prefer flexible office space solutions tailored to their specific needs.

Flex space demand across deal sizes

Deal Size	<100 seats	100-200 seats	201-300 seats	301-500 seats	>500 seats
Q1 FY 2023, Total seats leased 139,000 plus	13.1%	20.4%	13.3%	16.9%	36.4%

Source: JLL- Smartworks report