Flex space operator, Simpliwork Offices will lease around 1.2 million sq ft (MSF) of managed office space in FY22 with Gurgaon, Hyderabad and Mumbai driving the rally as large enterprises explore flexible lock in periods and a capital light real estate model focusing on making the workplace more productive and safe for employees.
“So 1.2 MSF net addition will happen in FY22. Within this, 4-4.50 lakh sq ft is Gurgaon and balance will be a combination of Mumbai and Hyderabad. We are also getting into tie-ups with buildings coming in 2023 in July or August or September. That will be another 5 lakh sq ft,” Simpliwork Offices founder & CEO, Kunal Walia told FE.
He attributes the growing interest from large corporates to uncertainty about the pandemic, pent up demand and lower rentals. In 2021, there is huge change post the second wave. Employers who restricted their office footprints last year are confronted with two realities — their headcounts are up as there is significant business coming to India, particularly in IT services, and most shrunk their offices in 2020.
“The combination of these two factors creates a significant pent up demand. Vaccination coverage is good so people are clear that once vaccinations are done, they can start bringing employees to office,” he added.
India Sotheby’s International Realty executive director, Gagan Randev also points towards the strategic shift in commercial leasing. “One is also witnessing some migratory trends amongst large enterprise clients to the hub and spoke model with flexible spaces, so employees can work closer to their suburban homes and eliminate the need to travel larger distances in shared cabs, shuttles and metros,” he added.
Companies are choosing spaces with less restrictive clauses like lower lock in periods, Randev said, adding, “For instance, it was common to see lock in periods of three years earlier but we rarely see lock ins greater than 12 to 18 months currently. Some companies will also become cautious in taking their full requirements in one go and may choose to work in managed workspaces under a similar flex model as they observe how 2022 and beyond would unfold”.
According to a Ficci-CBRE report on the future of flexible workspaces, released in August, in the coming years, corporations would look to include not only standard leased space in their office portfolios, but also a variety of other formats, including but not limited to flexible offices. “This is likely to enable employees to choose workplaces that match their lifestyles and the nature of their jobs – a trend CBRE believes would lead to a geographic dispersion of office locations,” it added.
Walia said that rationalisation of rental rates has happened across most major micro-markets in the last 6-7 months. Whether it is Hyderabad, Gurgaon or Bangalore, most developers realised that the market requires a correction, or a correction happened, thus leading to reduced prices, he added.
Citing examples, he said, “Cyber City in Gurgaon has seen a rationalisation in pricing of around 8-10%. While Udyog Vihar or Golf Course Extension or golf course (Gurgaon), is witnessing rental rationalisations to the extent of 10-14%. Real estate in Mumbai is very different, but even Lower Parel has corrected by 14-15%”.
Exuding confidence about the future of flexible work spaces, Walia noted, “Two years back, the flex space industry was contributing around 7% of the total office leasing. Today, I think within this year (FY22), 18-20% leasing would be through co-working and flex operators alone. So we have become one-fifth of the total leasing market”.