Flexible office stock expected to cross 100 mn sq ft-mark in two years

As the commercial space market continues to expand, the flex office stock is expected to cross the 100 million sq ft mark in the next two years, accounting for 20% of the pan-India office inventory. Also, after the pandemic, Kolkata and Pune witnessed a rise of 238% and 219% respectively with regard to the average transaction size while Mumbai saw a 46% decline, a report by Vestian has said.
The flex office space market witnessed a demand shift post-pandemic from start-ups and SMEs to large conglomerates owing to flexibility and the cost advantage. This led to almost 27 mn sq ft of flex space getting added to the total stock between 2020 and 2023 to cater to the growing demand. Moreover, around 10 mn sq ft of flex stock was added in 2023 alone. The total flex stock reached 67 mn sq ft by the end of H1 2024, registering an annual increase of 25%.
However, flex space still accounts for only 7.5% of the total grade-A office stock spread across the country. As the office market continues to expand rapidly, flex stock is anticipated to cross the 100 mn sq ft mark by the end of 2026, accounting for 20% of the pan-India office stock, the report showed.
The average transaction size with regard to flex office space nearly doubled to 36,590 sq ft in H1 2024 from 2015 levels. This marks a 13% increase compared to H1 2023, although it has not yet reached the peak observed in 2020, it said.
Post-pandemic, average transaction size by flex operators also increased across cities except Mumbai. Mumbai saw a 46% decline, with the average transaction size dropping to 21,550 sq ft. On the other hand, Kolkata and Pune witnessed an increase of 238% and 219% respectively in average transaction size for the same period. Hyderabad recorded the highest average transaction size of 53,210 sq ft in the post-pandemic period, which has increased by 55% compared to the pre-pandemic period (2015-2019), the report showed.
Flex operators not only grew in number but also expanded geographically. While tier-1 cities are major markets for flex operators, tier-2 cities such as Ahmedabad, Jaipur, Kochi, Lucknow, and Chandigarh are also gaining ground on the back of improved connectivity due to nationwide infrastructure developments, affordable office rentals, and ample availability of skilled workforce, the report showed.
Also Read: Bengaluru tops flexible office stock in Asia Pacific region, Delhi-NCR on second spot: Report
“Indian flex operators are geared up to fulfill the requirements of large conglomerates. They have added 1.84 lakh seats within a year, reaching close to 1 million as of H1 2024. Also, around 48% of the pan-India flex stock is green-certified and 78% is in grade-A buildings to cater to environmentally conscious large MNCs. Significant cost advantages, robust economic growth, urbanization, and stable demand from IT-ITeS companies and start-ups are the major demand drivers for flex spaces in the country,” said Shrinivas Rao, FRICS, CEO, Vestian.
Increased demand for flex spaces has led to strengthened financials. As a result, flex operators are able to negotiate favourable terms with fund houses and banks amid robust revenue streams. With strong revenue streams and ample funds, profitability is on the horizon as demand for flexible workspaces continues to remain high, the report showed.
Also Read: Flex office inventory in tier II, III cities to grow 25% by 2024-end, says report
Vestian is an occupier-focused workplace solutions firm specializing in commercial, residential, industrial, retail and hospitality sectors. Headquartered in Chicago, Vestian has offices across US, India, China, UK, Sri Lanka and the Middle East.