The flexible /co-working office supply will increase at a CAGR of 21-22% during FY2025-FY2027 and reach ~125 million square feet by March 2027 from ~80 million sq ft as of December 2024 for the top six cities including Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai Metropolitan Region (MMR) and Pune, said rating firm ICRA.
Leasing activity remained strong for flex workspaces with absorption of ~13 million sq ft against supply of ~14 million sq ft in FY2024, supported by healthy demand from enterprise clients, start-ups and domestic corporates, the rating firm said , adding this trend reduced the vacancy levels by 300 bps to 17% as of March 2024 from 20% as of March 2023.
Despite the influx of a huge supply of 17-19 million sq ft in the flex workspace each from FY2025 to FY2027, ICRA expects vacancies to remain range-bound at 16.5-17% by March 2025 and improve to 15.5-16.5% by March 2026 and March 2027, it said
:”The flex office supply for top six cities has more than doubled to over 67 million sq ft as of March 2024 from 32 million sq ft as of March 2020. ICRA projects it to further expand to 121-125 million sq ft by March 2027,” said Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA.
The demand for such spaces has increased at a brisk pace – driven by flexibility, short-lease tenures and lower upfront cost in terms of capex for tenants. The share of flex workspaces in the commercial office segment (non-SEZ) is expected to double to 12.5-13.5% in FY2027 from 5.3% in FY2020, Reddy said .
While several flex office operators entered the space in recent years, the market remains organised, with the top five players accounting for 40% of the overall flex office space in FY2024, she said . This segment, is set to witness five major IPOs in the next 12-18 months, which are projected to raise over Rs. 7,000 crore, she said.
. Post pandemic, the rise of hybrid work models and desire for diverse work settings saw a significant revival in the flex segment in 2023 and 2024. As of December 2024, there are over 450 flex operators in India with more than 2,000 unique locations, ICRA said .
The top five players account for 40% of the total flex supply. Bengaluru has the highest supply of both commercial office and flexible workspace markets in India, accounting for 32% of the total flexible workspace supply across the top six cities, it said