Flex is emerging now as a prominent asset class in the CRE (commercial real estate) segment. Today, even big enterprises and MNCs are going for flex spaces and for some global companies, the flex segment is a platform to expand their footprints in new markets. This is evident from the segment’s growth story over the last 2-3 years, says Ashish Agarwal, Co-founder & CEO, Enzyme Office Spaces, a leading chain of co-working spaces located across Bangalore.

In an exclusive interview with Sanjeev Sinha, Mr Agarwal talks about the recent surge in demand for managed and flexible office spaces in India, and shares his business outlook. Excerpts:

What factors do you believe have been the primary catalysts behind the recent surge in demand for managed and flexible office spaces in India?

The surging demand for flex spaces can be attributed mainly to the changing preferences of occupiers post-pandemic. The office segment took the road to recovery and began to rebound with agility, the market witnessed a sharp uptick in rental and leasing prices with demand for flexible office at an all time high. Many enterprises prefer managed models due to flexibility and lower cost. Moreover, flex space arrangements seemed viable for near to medium-term space requirements of occupiers. Apart from these, there are other factors like customization, tech enablement and locational advantages which acted as demand drivers.

How do you perceive the current state of integration between the Indian co-working/flexible office segment and the broader commercial real estate market?

I think it is picking up pace and in the next few years this integration will gain more traction. Earlier the flex segment was just a concept of lending seats and shared spaces to small companies, primarily start-ups who couldn’t afford a full-fledged office. But now flex is emerging as a prominent asset class in the CRE segment. Today, even big enterprises and MNCs are going for flex spaces and for some global companies, the flex segment is a platform to expand their footprints in new markets. This is evident from the segment’s growth story over the last 2-3 years. The share of space leased by flex players in GLV grew from 9% in FY20 to 14% in FY23.

Also Read: Loan Against Securities Vs Personal Loan: What should you choose?

As managed workspaces have already created a niche for themselves, how are you as a player in the industry planning to stay ahead of the curve?

There are some key differentiators that are helping us to stay ahead of the curve. Firstly, we have the locational advantage that is driving a lot of demand from prominent occupiers. We have state-of-the-art flexible office spaces in Whitefield which boast one of the most vibrant IT ecosystem, business districts and upmarket residential complexes. As a result, our co-working spaces are the most popular and coveted among the new age enterprises who want to do things differently. Besides, we offer a flexible membership plan that caters to a wide range of requirements, starting from a hot desk for a day to a lease for a year. This is an attractive proposition for a lot of businesses who are looking to expand but need flexibility too.

Today, businesses are ready to experiment and try out new things. Since our working styles and preferences have experienced a paradigm shift, working is not confined within the monotonous cubicle system. As both employees and enterprises are looking for flexibility, personalized experiences and a sense of community and belongingness, the flex segment is offering them the right solution.

From a property owner’s perspective, what advantages and challenges come with integrating flexible office solutions into their commercial real estate offerings?

The advantage is that occupiers are now keen on leasing flex spaces as these spaces are offering the same kind of amenities that a Grade A space offers. Earlier the need was completely different, but today, the requirements have changed. The bigger companies and well-known brands are going for flex spaces as these spaces offer the advantages of a prime location, state-of-the-art amenities and a lot of customization options. When it comes to challenge, I think the main pain point is the rising cost of quality assets and land prices. Besides, there is limited supply. As a result, property owners sometimes find it difficult to expand at the desired pace. The property owners also sometimes have to compromise on locations since acquisition of quality space in a prime location has become a challenge.

Also Read: 6 effective ways to track your expenses

How do you foresee this integration impacting the traditional leasing models for commercial spaces in the upcoming quarter?

I would say that both will go hand in hand and there will be everything for everyone. Even though the flex segment will witness unprecedented growth in the coming years owing to a resilient economy, availability of talent, robust job market and positive investment sentiments, traditional leasing models will still be preferred by businesses.

Looking ahead, how do you envision the managed and flexible office space landscape evolving over the next few years? What trends might shape this evolution?

The future indeed looks promising for the segment. Today flight to quality is the common theme amongst occupiers and flex will be able to do full justice to this. Besides, more and more occupiers are looking for spaces that are ESG-compliant and follow sustainable models. A report suggests that a lot of existing older office assets and inventory will go obsolete as they were built at a time when there was no concept of sustainability. This will create new opportunities for the flex segment as these modern workspaces are future-ready and are in sync with the global standards. These factors will make the flex segment the coveted choice for global occupiers who are looking to expand their base in India.

What are the future plans for Enzyme?

In this year & by 2024, we want to capture the Bangalore market from North to South and from East to West. We have plans to expand to two more cities by the year 2025 and most probably, they will be Hyderabad and Noida.