Flex space demand on the rise as hybrid work model finds footing: Colliers

• The share of flex spaces in occupiers' overall portfolio in India is estimated to have risen to around 10-12% in 2023
  
• As of Q1 2023, the flex space penetration in India is reported to be at 6.5%.
  
• Tech companies occupy 50% of total flex space in India.
  

In an evolving global workplace, occupiers in Asia-Pacific (APAC) are struggling with the challenges posed by the hybrid work model, which displays inconsistencies across different markets and industries, as per the Global Occupier Outlook 2023 by Colliers, a services and investment management company.

However, despite the widespread challenges faced by occupiers globally, the adoption of flex spaces in India has been rapid. This can be attributed to the attractiveness of flexibility, agility, and cost-effectiveness that flex spaces offer.

According to industry experts, flex spaces are increasingly becoming an essential component of occupiers' portfolios in India. The share of flex spaces in occupiers' overall portfolio is estimated to have risen to around 10-12% in 2023, up from 5-8% before the pandemic in 2019, based on interactions with industry experts.

Says Peush Jain, Managing Director, Office Services, India, “Flex spaces have emerged as a core strategy for occupiers to adopt a decentralized workspace model, serving as a promising alternative to the traditional paradigm. As compared to shorter lease tenures of 1-2 years pre-pandemic, occupiers are now going for longer commitments of 3-5 years with flex space operators as they look to integrate flex space as a long-term solution. During 2022, leasing by flex space operators touched 7 mn sq ft across top 6 cities, highest in any year. This was a 46% Y-o-Y increase led by prominent IT hubs such as Bengaluru and Pune.”

As of Q1 2023, the flex space penetration in India (or the proportion of grade A flex space stock to grade A office stock) is reported to be at 6.5%. Flex spaces have offered companies the necessary agility to rapidly scale their operations, allowing businesses to effectively adapt to changing circumstances.

Tech drives adoption

In India, the demand for flex spaces has been significantly driven by technology occupiers in the top cities with tech companies occupying 50% of total flex space in India.

Additionally, sectors such as engineering and manufacturing and BFSI (banking, financial services, and insurance) are actively adopting hybrid working models through flex spaces. In larger markets like Mumbai and Bengaluru, the demand for flex space from BFSI and engineering occupiers is nearly equal to that of technology occupiers. Looking ahead, the demand from technology occupiers is expected to remain strong in the next two years, driven by a robust recovery and hiring plans as businesses continue to prioritize cost rationalization.

Hybrid, the way forward

Occupiers are reevaluating their office footprint to determine the ideal balance for their employees, favoring a hybrid work model. While remote work has been experienced extensively, physical presence is deemed crucial by major occupiers. Flex spaces have emerged as a central solution, optimizing costs and enabling employee flexibility.

The hybrid model has reset workplace expectations, allowing employees to choose where they work. Distributed workspace strategies are increasingly popular, with companies opting for multiple satellite offices instead of a single headquarters. This has driven demand for flex spaces in peripheral and non-metro cities, particularly among technology, consulting, and e-commerce firms.