The office market sector in India has been witnessing uncertainty for the most part in the past two years. It has taken several hard decisions and various strategic permutations on the part of the industry players to keep afloat and strive towards relative normalcy during the pandemic-induced hardship. One such approach that has been suitable for business continuity is, a shift towards flexible workspaces, where the corporate has a formal office set-up but with reduced real estate costs and overheads.

The office market sector in India has been witnessing uncertainty for the most part in the past two years. It has taken several hard decisions and various strategic permutations on the part of the industry players to keep afloat and strive towards relative normalcy during the pandemic-induced hardship. One such approach that has been suitable for business continuity is, a shift towards flexible workspaces, where the corporate has a formal office set-up but with reduced real estate costs and overheads.

The rise, fall and measured resurgence of the segment

Largely constituting of co-working/managed office space operators, the flexible workspace segment has already made strong in-roads into the country’s office market, comprising of both global and local operators, thus making it fairly convenient for companies to make plans for such alternative office space arrangements. In the pre-pandemic period, during 2019, leasing in this segment was recorded at around 10.5 million sqft, up from 8.5 million sqft in 2018, primarily led by Bengaluru and Hyderabad. With 2020 witnessing severe constriction in office space absorption, flexible space leasing was noted at a subdued quantum of 3.8 million sqft, constituting 10.5% of the total absorption during the year. Operators of such space underwent considerable turmoil with occupiers holding active negotiations in the face of adversity, till mutual considerations were met to some extent and relative stability returned to the market by the end of 2020.  2021, a period marked by hope of a resurgence and yet marred by the impact of the pandemic second wave, witnessed the flexible workspace leasing clocked at nearly 5.8 million sqft, depicting a substantial 53% growth over the previous year’s figure.

What the new year holds

The year 2022, has begun with apprehensions regarding the Omicron variant and for the third continued year, companies would have to practice prudence in their growth plans, putting a halt to long-term office leasing plans. In the meantime, workplace dynamics have been evolving rapidly in the wake of the pandemic, with WFH arrangement turning contentious and giving way to hybrid work models as a preferred mode of working. With ‘hybrid’ approach expected to nurture employees’ prospects and enabling them to be productive irrespective of where they work from, landlords, developers and flexible workspace operators will thus need to adapt intently to occupier demands for increased flexibility.

There would be more demand for quality workspaces that are well-located and offer convenience to the employees besides a gamut of other facilities that promote well-being and hygiene. Undoubtedly, flexible/managed office space operators with their strategically located workspaces, would stand to gain from such demand. Further, of the major expectations related to office space occupancy this year, flexibility of lease terms will form the core of most deals, which would again work to the advantage of operators of such space. While flexible/managed office operators would continue to offer their products, the office market would see the advent of institutional investors and developers in this space, presenting similar lease options and capabilities. This development would eventually lead to competition heating up in the flexible workspace market.

Furthermore, the fragmented nature of the market – the consequence of an influx of smaller local operators entering the lucrative business – would eventually result in consolidations, given the constrained market situation. Larger players seeking to augment their geographical presence would acquire smaller players to cater to the varied demand of their tenants, most of them preferring to be located in facilities spread across a region/city for the convenience of their employees.

Emerging new facets

The real estate industry, today, has recognised its pertinent role in sustainable development and an increasing number of organisations are committing to ESG and net-zero goals. As we progress through 2022, companies would look towards occupying workspaces that support and adhere to such environmentally consistent guidelines. Thus, soon, we expect to see the flexible workspace segment gearing up to meet these imminent occupier requirements and move in the direction of improved work environment in the near future.

Summing up

To sum up, flexible workspace has today earned itself a key position in the office market scenario, chiefly by dint of its willingness to offer various levels of real estate flexibility and preferences that work for both tenants and landlords. Flexible workspace will continue to provide the required succour to many companies looking at keeping their businesses up and running from an office establishment, while keeping the operations and workforce agile. Further, digital transformation of workplaces holding the potential of leading to more project-based work, boding well for flexible space demand. Thus, continued strengthening of the flexible workspace segment during 2022  would expectedly lead it to occupy a sizeable portion of mainstream commercial real estate in the forthcoming period.

REITs, today, are increasingly being preferred as a viable investment option as they are real estate asset backed, operated and maintained by trusts. While the share of REITs in the overall real estate market capitalization is quite substantial on a global scale and have been in existence in the west since the 1960s, the current […]

The post REITs in India: On an Upward Trajectory

REITs, today, are increasingly being preferred as a viable investment option as they are real estate asset backed, operated and maintained by trusts. While the share of REITs in the overall real estate market capitalization is quite substantial on a global scale and have been in existence in the west since the 1960s, the current […]

The post REITs in India: On an Upward Trajectory appeared first on Vestian Blog.

Indian real estate went through one of its most challenging phases in 2020 as industries across the globe observed severe constraints in the wake of the COVID-19 crisis. The period witnessed some of the harshest upheavals in the real estate industry in modern times, encompassing even the otherwise robust office market of the country and […]

The post Looking back 2021:

Indian real estate went through one of its most challenging phases in 2020 as industries across the globe observed severe constraints in the wake of the COVID-19 crisis. The period witnessed some of the harshest upheavals in the real estate industry in modern times, encompassing even the otherwise robust office market of the country and […]

The post Looking back 2021: Resilience in the Face of Tribulations appeared first on Vestian Blog.

Net zero commitments have increased rapidly over the years as countries, cities and businesses have pledged to create a more sustainable future. As real estate and the built environment is responsible for more than 40% of global carbon emissions, the sector has a significant role to play in achieving the net zero targets. Decarbonizing has become […]

The post To build or to refurbish? appeared

Net zero commitments have increased rapidly over the years as countries, cities and businesses have pledged to create a more sustainable future. As real estate and the built environment is responsible for more than 40% of global carbon emissions, the sector has a significant role to play in achieving the net zero targets. Decarbonizing has become […]

The post To build or to refurbish? appeared first on Vestian Blog.

The past few years have witnessed a plethora of investment avenues opening up for the discerning investor in the country. With an increasing number of people veering towards an alternate income source, largely to fulfil their aspirations and fortify their retirement corpus, fractional ownership in Commercial Real Estate (CRE) has emerged as one of the […]

The post Fractional

The past few years have witnessed a plethora of investment avenues opening up for the discerning investor in the country. With an increasing number of people veering towards an alternate income source, largely to fulfil their aspirations and fortify their retirement corpus, fractional ownership in Commercial Real Estate (CRE) has emerged as one of the […]

The post Fractional Ownership In Commercial Real Estate in India – Viability And Outlook appeared first on Vestian Blog.

2022 was supposed to be a year of accelerating growth as we recover from the pandemic, especially for commercial real estate sectors that were particularly hard hit, such as retail, office and hotels. While the economic prognosis is still good, the Delta variant is raising doubts about top line forecasts. What can CRE expect in […]

The post The Delta Variant Is Causing

2022 was supposed to be a year of accelerating growth as we recover from the pandemic, especially for commercial real estate sectors that were particularly hard hit, such as retail, office and hotels. While the economic prognosis is still good, the Delta variant is raising doubts about top line forecasts. What can CRE expect in […]

The post The Delta Variant Is Causing Doubts. What Can CRE Expect? appeared first on Vestian Blog.

The Union Budget 2021 has been one of the most awaited events this year. Slated to be a budget like no other’ it held a momentous bearing on the economy’s growth trajectory as it strove to steady itself after the COVID-19 pandemic and the subsequent economic upheaval. A lot of expectations were riding on receiving […]

The post Union Budget 2021 – Developing

The Union Budget 2021 has been one of the most awaited events this year. Slated to be a budget like no other’ it held a momentous bearing on the economy’s growth trajectory as it strove to steady itself after the COVID-19 pandemic and the subsequent economic upheaval. A lot of expectations were riding on receiving […]

The post Union Budget 2021 – Developing competencies towards self-sufficiency appeared first on Vestian Blog.