Occupancy rates for flexible workspaces exceed 80% across all major office markets. Key office hubs such as Mumbai (94%), NCR (92%), Bengaluru (86%), and Hyderabad (84%) continue to draw corporations, resulting in heightened demand for adaptable office environments, according to a Knight Frank India report.
In response to this growing demand, flexible space providers have markedly expanded their office space acquisitions, leasing approximately 52.9 mn sq ft (msf) from 2017 through the first half of 2024, achieving a strong compound annual growth rate (CAGR) of 22%. During the first half of 2024 (January to June), flexible workspace operators leased 7.17 msf, reflecting a 6% increase compared to the same period in 2023. This leasing activity represented over 21% of total commercial real estate transactions, underscoring the increasing interest in flexible workspaces.
Commenting on the same, Shishir Baijal, CMD, Knight Frank India, said, “With GDP growth projections for FY 2025 reaffirming India as the fastest-growing major economy, the demand for innovative office spaces is soaring. Occupiers are now looking beyond basic amenities to focus on employee well-being, and flexible office space operators are well-positioned to meet these evolving demands. By embracing ESG principles and cutting-edge technology, the sector isn’t just keeping pace—it’s setting the agenda for the future of workspaces, creating agile solutions that align with the ambitions of modern businesses and drive lasting growth.”
Also Read: NPS Calculator: Already in your 40s? How much should you save to get Rs 5 lakh monthly pension?
Commenting on the Knight Frank India report, LC Mittal, Director, Motia Group, said, that in India, the flexible workspace industry is booming with approximately more than 80% of occupancy across major office market. This is a sign of the sector being able to see changing commercial real estate needs in a nimble manner. This trend is evident as there are high occupancy rates with 94 percent and 92 percent in cities like Mumbai and NCR, respectably, indicating the benefits of flex spaces in densely populated cities.
“The IT sector comes out on top with aged demand thanks to the accessible and cooperative space. Transactions of flex space operators have grown remarkably with a 22% CAGR since 2017 and leased 52.9 million square feet. Such an impressive and consistent growth figures is not just a passing phase but a permanent shift in the way companies think about office spaces. The rising demand of managed office spaces further demonstrates the growth of this space in India,” Mittal added.
Keshav Mangla, GM-Business Development, Forteasia Realty Pvt Ltd, said though the flexible workspace sector has notably secured substantial private equity funding amounting to US$ 820 million since 2017; however, the investment trends have exhibited significant inconsistency. The fluctuations in investment levels are evident, with a peak of $595 million in 2022 dramatically falling to just $13 million in 2023, reflecting the current condition of this industry.
“This volatility, however, does not seem to dampen the growth potential of the sector in terms of increased financing and better performance. In the report, it was noticed that flex operators were not only substantiating their presence in NCR and Bengaluru in Tier 1 cities for expansions, but were also scouting for Tier 2 cities like Coimbatore, Jaipur, Nagpur, and Mysuru. This growth plan indicates a diversification of the flexible working model outside the ideal capital cities and could very much redefine work habits in different cities in India. The recovery of the sector can also be seen with the proportion of flex spaces in total office transactions increasing which were over 21 percent in H1 2024.”
Aman Gupta, Director of RPS Group, said, “The Knight Frank India report on flexible workspaces brings an interesting element of cost regulation in the dynamic industry. It may be taken for granted that there is often a large cost differential in flex space versus standard leases, but this assumption is incorrect. In the detailed comparison of occupancy costs of different grades of office accommodation of key cities, it turns out that flex space operators can maintain ‘affordable’ rents even at B and C grade level office spaces as opposed to conventional leasing. This cost benefit of operating activities further coupled with future growth orientation and ESG compliance offers a very fine value for customers. The structure of the costs including rentals, CAPEX, OPEX and CAM fees shows how flex players are positioned in the economy so as to charge reasonable fees. In fact, in Mumbai the flex space of A grade is about 294 INR/sq ft/ month as against 304 INR/sq ft/month for normal.”
However, “this understating difference together with the additional benefits of flexibility and ancillary offerings from flex spaces potentially reduces the stigma some companies have towards flebble estates which could change how companies approach their real estate decisions,” he added.
Anurag Goel, Director, Goel Ganga Developments, said, “The construction industry has evolved, making flexible spaces an option and by adopting new technologies, making them healthier. Whereas a few years ago flexible workspaces were considered as a trend, today, many of them are pioneers in introducing new approaches to the organization of work. They do not only integrate modern technology and address sustainability but also change the focus form technological to user health in flex-oriented workspaces these days.”