Flex spaces may garner 20% market share of total office leasing by the end of 2022: Savills India | The Financial Express

Flex spaces may garner 20% market share of total office leasing by the end of 2022: Savills India

Flex spaces have continued to drive the strong resurgence of commercial real estate in 2022.

Flex spaces may garner 20% market share of total office leasing by the end of 2022: Savills India
Co-working operators have leased over 75,000 seats in H1 2022, compared to 60,000 seats in 2021.

Office market leasing has had a strong bounce back in H1 2022 with 30.4 mn sq ft gross leasing volume, and Savills India expects the recovery to exceed pre-pandemic levels, with a projected 50-60% YoY increase by year-end in comparison to 2021. Interestingly, since 2018, the overall commercial real estate activity in 6 major markets of the country has been directly correlated with the performance of the co-working sector.

Savills India Research expects flex spaces across India’s six major cities to witness a new peak in terms of gross absorption, with the sector likely to account for 20% market share of the overall office space demand reaching 12.0 mn sq ft by the end of 2022, surpassing the pre-pandemic 14% share in 2019.

Flex spaces have continued to drive the strong resurgence of commercial real estate in 2022. The sector accounted for an 18% market share of the total office leasing activity witnessed in the first half of 2022. Co-working operators with out-of-box services and enterprise-level offerings have taken advantage of the dynamic commercial real estate requirements and regained the confidence of occupiers.

With employees returning to physical offices, agility and flexibility has become the core of the real estate decision-making process. Consequently, strong traction is evident in co-working desks taken up by occupiers in H1 2022.

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Co-working operators have leased over 75,000 seats in H1 2022, compared to 60,000 seats in 2021. Almost 75% of the demand for co-working desks in H1 2022 can be attributed to the three largest flex markets – 45% in Bengaluru, 20% in Pune, and 10% in Hyderabad. Total flex seat demand is anticipated to reach a new high with 150,000 seats, an increase of 1.5X YOY in 2022, as per Savills India’s Research.

Commenting on the same, Naveen Nandwani, MD-Commercial Advisory & Transactions, Savills India, and Head-Workthere India, said, “As businesses evolve, shared spaces will continue to provide organizations a chance to design a highly fluid commercial real estate portfolio as per their business strategies. Real estate cost optimization and explosive growth in hybrid work are likely to be the driving factors for the co-working sector growth in Tier II and III cities of the country.”

The report also highlights that the weighted average per seat rental witnessed a positive correlation with the demand for managed spaces in the country. With healthy co-working sector traction envisaged for the rest of the year, average monthly rentals in India are expected to touch Rs 12,500/ seat by the end of 2022, a 13% YoY growth.

H1 2022 saw start-ups take up 13% share in flex seats while new age businesses such as FinTech, HealthTech, EdTech, RetailTech, etc had a market share of 20% with a cumulative uptake of around 15,500 seats. Contrary to earlier times, where flex spaces were held appropriate for most start-ups and mid-range companies, almost 52% of flex space leasing has come from MNCs. In the age of hybrid and work from anywhere culture, MNCs are embracing co-working spaces to encourage employees to work in locations closer to their homes, while keeping a check on dynamic real estate requirements.

Interestingly, the average transaction size of co-working spaces is almost 53% higher than the average of other sectors from 2020 to H1 2022. The sector has already witnessed 35 transactions of 50,000 sq. ft. or more in H1 2022, exceeding the full-year big-ticket activity of 2021. The dominance of big-ticket transactions is also reflected in the number of desks taken up by large occupiers in co-working centers across the country.

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