While the versatile workplace space (flex space) business may perhaps see demand for co-working and managed workspaces rise in the present calendar year with corporations focusing on a mix of work-from-household and work-close to-household some may perhaps face hard occasions as general leasing activity may perhaps be subdued.
Analysts are of the view that the present more than 400-player robust business will drop more than half its weight in next 12-18 months.
JLL India, in a report in November 2020, had stated the Indian flex space marketplace was in the midst of a robust development cycle till it began facing headwinds due to the Covid-19 pandemic. The provide boom resulted in a important rise in total stock – from 9.9 million sqft (MSF) in 2017 to 29.5 MSF by September 2020.
“Importantly, the current flex market penetration in India stands at 3%. It lags behind the more mature markets in EMEA and America, where market penetration of flex spaces in the office market is around the 5% mark. This provides indications of the inherent growth potential of the flex office market in India,” it noted.
Managed offices model is normally preferred by substantial and mid-sized corporates who want enterprise options, but with flexibility. Co-working model is popular with commence-ups who are largely seeking at flexibility.
Real estate business veteran and former CEO of JLL India Ramesh Nair sums up the rise in demand for flex space to 3 trends. “One is that corporates do not want to spend too much on capex. Second, they want more flexibility in their leases and third is they want to give more choices to employees,” he added.
In brief term the largest challenge is monetary stability, which is getting impacted by decrease occupancy prices, more lease terminations and demand reduction, Nair pointed out, adding, “Co-working will see massive consolidation. Industry has over 400 players and it will consolidate amongst about 20. There is not enough room for everyone.”
Anarock Property Consultants chairman, Anuj Puri stated, “We thought that there would be a lot of consolidation when Covid hit, but it has not taken place. Certainly there will be people who will go out of business, but they are essentially those flex spaces that are so bad that nobody wants to consolidate them. Those will get shut rather than anybody buying them.”
Workspace options platform Awfis founder & CEO Amit Ramani agreed that business would go via a churn. He stated the pure co-working model, exactly where players are dependent on commence-ups and SMEs to come and lease space, would be the hardest hit.
“Now this model is where the majority of those 300-400 players exist. They are hit the hardest as they did not have a lot of capital. Their contracts were short term and size was like 50 seats. They faced a lot of challenges and a majority of them would not come back. I don’t know the number, but half or more will go for sure,” he added.
Puri expects a hybrid model below which workers would attend workplace 3-4 days a week.
“For instance, when I look at my own firm of 2,000 people, many from HR, finance, legal, marketing, etc only come two-three days a week, yet productivity has been outstanding. We are 30-40% occupied right now, but our revenues are over 100% of pre-Covid, which means work is going on,” he added.
Going ahead, majority of leasing (75-80%) activity will be with developers leasing workplace space to corporates, though the balance 20-25% will be flex space operators, of which 25-30% will be managed offices, though the remaining will be co-working, he added.