The corporate real estate sector has shown resilience through the pandemic, evolving workspace strategies and the global macro economic headwinds. 2022 witnessed a huge demand for office spaces globally inspite of hybrid and remote working. The commercial real estate segment is likely to grow substantially in 2023 as well. The main drivers of the absorption of office space are companies from a variety of industries, including IT, manufacturing, BFSI, startups, AI, etc.
Along with the office space market, the retail and hospitality sector also gained momentum through 2022 providing the necessary infrastructure for the country’s growing needs. In the coming years, India’s commercial real estate sector is projected to significantly grow with the influx of large-scale investments by institutional investors along with the various government initiatives and reforms. The transparency and competence of the industry, further attracted foreign direct investment (FDI). Office space sector has also evolved as a great investment option with fractional real estate investments which offers individuals the chance to securely invest in Grade A buildings with high yielding returns.
RISE OF FLEXIBLE WORKPLACE SOLUTIONS
Flex space or flexible space, is a type of workplace solution that offers companies an equipped office without having to make a long-term lease commitment. These kind of spaces are what we know as co-working spaces and managed/serviced office spaces. These kind of offices are typically designed with smaller working suites connected by common areas such as reception, cafeteria, pantry etc. Organisations often get to choose how you would like to build out your space instead of being constrained to the standard office layout. Scaling workforce is also often easier in a flexible workplace.
The Indian office and flex space growth story is being driven by a combination of factors, including:
Changing Work Culture: The pandemic has accelerated the shift towards remote work and flexible work arrangements. Many companies are realigning their real estate strategies and considering flexible workspace solutions to meet the changing needs of their employees.
Increase in Foreign Investment: India is an attractive destination for foreign investment, and this is driving demand for office space. As more companies set up operations in India, it aligns with the increase in demand for commercial real estate.
Government Initiatives: The Indian government has launched several initiatives to promote entrepreneurship and innovation, including Startup India and Digital India. These initiatives are driving demand for flexible space, which provide an excellent and a supportive ecosystem for startups and entrepreneurs.
Overall Economic Growth: Growing GDP, better infrastructure and rapid urbanisation have also added to the growth of the several industries, thereby adding to the growth of commercial real estate demand.
Tech Enabled Workspace: The pandemic has changed the way businesses operate and their overall strategies. Organisations these days have become increasingly mobile and agile and are looking at creating new generation workspaces. There is an increased demand for a tech-enabled work environment that enables and enhances employee experience.
Growing Tier II Cities: While companies continue to grow in Tier-1 cities, there is also a considerable demand for office space in Tier II cities. Flex Spaces are also routing to develop in these cities.
While companies continue to grow in Tier-1 cities, Tier-2 cities have also seen a considerable increase in the demand for office spaces particularly flexible workplace solutions.
Flex Space – Easily Adaptable To CRE Strategies: Over 2,300 flexible workplace centres are currently operating across India, which are occupied by start-ups to mid-size to multinational companies. Businesses are redesigning their workspaces and adapting to flex spaces in their real estate portfolios as a result of the hybrid work model and workforce decentralisation. Flex space is also ideal for growing companies due to its flexible lease terms, minimal capital expenditure and shared facilities and amenities. Businesses can save on their overhead costs and focus solely on their business goals. According to a research in the past year, the office space leased in the country crossed ~50 million sq. ft., of which 14 % corresponded to leasing by flex players, which is an all-time high.
Studies suggest that 77% of respondents are likely to include flexible space in their portfolios in the upcoming years. As the demand for office space continues to grow, we can expect to see more innovative workspace solutions and flexible lease terms to meet the changing requirements of businesses in India.