Bengaluru remains India’s largest market for flexible workspaces: Colliers report
Operators of coworking or flexible working space represents about 8% of total absorption in 2017 (3.42 million sq ft) compared to share of 3% in 2016. The dominating market remained Bengaluru with almost 32% share of the overall flexible workspaces pie in 2017, followed by Mumbai with almost 18% share, according to a report by Colliers International India.
Bengaluru is the largest market for flexible workspace in India and has the largest share of technology start-ups. Initially characterised by domestic operators, the market now has a more diverse range with international entrants including WeWork, The Executive Centre and Regus. Over 2017, take-up by flexible workspace operators amounted to 1.1 million sq ft, approximately 7% of Bengaluru’s total office market absorption.
“2018 is likely to be an active year in the flexible workspace sector, fueled by an increase in end-user demand from the IT industry, which is looking for ways to mitigate real estate costs and seeking flexible solutions. Occupiers across the market are seeking to minimise risk by avoiding long-term leases and the flexible workspace sector is set to be the beneficiary of this uncertainty” said Goutam Chakraborty, Senior Director, Office Services (Bengaluru) at Colliers International India.
The CBD has remained one of the preferred locations, with approximately 23% of the flexible workspace operator transactions for the year. Other notable districts were SBD (28%) and Koramangala (18%). Surprisingly, Outer Ring Road (ORR) had a share of only 4%, despite being the technology hub of Bengaluru. The largest transaction in 2017 was around 135,000 sq ft by WeWork in the CBD. In 2018, we anticipate further activity from WeWork, which has secured 88,000 sq ft in RMZ Latitude in Bellary Road (CBD); CoWorks, which has taken up 22,000 sq ft in RMZ Infinity in Old Madras Road; and Table Space, which secured 46,000 sq ft in IBC Knowledge Park off Bannerghatta Road, the report said.
The flexible workspace market in Mumbai is quickly catching up to Bengaluru as the largest for the sector in India. In a bid to ensure space efficiency, occupiers in Mumbai are embracing the trend for flexible workspace to cater to this increased demand, various local operators have expanded at a rapid pace, fuelled by external investment. Notable investments included Sequoia Capital investing USD 20 million in Awfis and WeWork raising USD 30 million for its India expansion.
Mumbai’s traditional CBD, Nariman Point, accommodates relatively small flexible workspace locations and most operators are planning to concentrate on the new financial hub of the city, BKC, and surrounding areas. The take-up by flexible workspace operators in Mumbai increased from 380,000 sq ft in 2016 to more than 600,000 sq ft (0.6 million sq ft) in 2017. In 2017, flexible workspace accounted for 12% of total market take-up and remains concentrated in SBD locations such as BKC, Andheri and Worli. We expect this trend to continue in 2018 bearing in mind the restricted supply in key markets in Mumbai. Companies such as iKeva and Avanta have recently announced expansion plans. Major operators present in the Mumbai market are a mix of international and domestic names including WeWork, Regus, Awfis, Avanta Business Center, Innov8 and Ikeva. Most have membership rates of USD 125–400 per desk per month.
“Currently flexible workspace operators have a strong presence in major commercial hubs such as BKC, Andheri, Powai, Vikhroli and Lower Parel. While their footprint has increased tremendously in the last year it has been confined predominantly to these locations. However, we expect growth in 2018 to occur across all micromarkets”, said Ravi Ahuja, Senior Executive Director, Mumbai & Developer Services at Colliers International India
Golf Course Road emerged as the preferred location for flexible workspace operators in Gurugram. Noida Expressway– Yamuna Expressway has also seen major activity in Noida due to good connectivity and ready availability of Grade A buildings. In Delhi NCR, flexible office space operators leased around 364,000 sq ft (~0.36 million sq ft) in 2017 representing about 4.5% of city’s office absorption. Major operators present in the NCR market include Regus, Awfis, 91 Springboard, Instaoffice, The Executive Centre and Avanta Business Centre, with membership options ranging from USD110–420 per desk per month. GoWork recently opened the biggest flexible workspace centre in the world in Gurugram. Once fully operational it may accommodate 12,000 desks across 800,000 sq ft. WeWork also opened its first location in Delhi NCR with almost 150,000 sq ft on MG Road. In 2017 we have seen major landlords display keen interest in tying up with operators. DLF, Supertech and Vatika have been particularly active in this sector, with DLF launching a modest centre in Cyber City in partnership with Skootr.
“With the rise of the millennial workforce, which is estimated will make up 50% of the global workforce by 2020, and growth within the technology sector, in particular FinTech, more occupiers are seeking flexible, non-traditional solutions to meet the demands of their rapid growth. The sector is maturing and with the participation of larger operators GoWork and WeWork, we can expect the scale of activity and quality of product to improve over 2018”, said Sanjay Chatrath, Executive Director, NCR at Colliers International India.