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Tech Companies Occupy 50% Of Total Flex Space In India
According to Colliers' experts, companies are facing the dilemma of striking a balance between providing employees with the desired flexibility and realigning their portfolios for the next evolution of the workplace
Photo Credit : Courtesy: iStock/johnason
The latest Colliers' report 'Global Occupier Outlook 2023', highlights key takeaways and insights on the evolving global workplace. The report reveals that APAC occupiers are grappling with the complexities of the hybrid work model, which remains inconsistent across markets and industries. The lack of clarity and macroeconomic uncertainty is posing challenges for businesses in projecting their space requirements.
According to Colliers' experts, companies are facing the dilemma of striking a balance between providing employees with the desired flexibility and realigning their portfolios for the next evolution of the workplace. Consequently, many businesses are deferring decisions on office take-up and investment. Despite these challenges across the globe, occupiers in India have been quick to adopt flex spaces, attracted by flexibility, agility, and cost-effectiveness. Flex spaces are becoming an integral part of occupiers' portfolios, with its share in occupiers' total portfolio rising to an estimated 10-12 per cent in 2023, from 5-8 per cent before the pandemic in 2019, as per interactions with industry experts.
Colliers' leadership Sam Harvey-Jones, Chief Operating Officer, Asia Pacific and Mike Davis, Managing Director, Occupier Services, Asia Pacific in their recent visit to India note the positive market sentiments echoed by the Indian occupiers, particularly within the technology sector to adapt to the changing landscape with a focus on increasing flex space, using data to help in informed decision making and focus on the employee experience.
Harvey-Jones said, "The APAC region is undergoing a significant transformation in the way workspaces are perceived and utilised. While challenges persist, this period of change presents unprecedented opportunities to reimagine the role of space and explore new approaches that cater to evolving employee needs. The research finds APAC occupiers are shifting from an 'inward' business view of what's important in an office or location, to an 'external' view of what locations gives their employees access to in terms of culture, lifestyle and wellness."
Davis added, "Adopting technology solutions such as digital tools and dashboards is critical for addressing the challenges posed by the hybrid workforce. These tools enable occupiers to optimize space utilization, implement safety measures, and make data-driven decisions."
Colliers has developed tools that integrate various data sources to provide a comprehensive view and facilitate informed decision-making.
Key trends witnessed by occupiers across the globe
The report features insights and resilient strategies being adopted by real estate decision-makers to prepare for an uncertain future, adapt to emerging market trends and overcome unprecedented challenges. Focusing on three key aspects, Engage, Evolve and Accelerate, the findings uncover efforts being made by some of the leading global companies to strengthen processes, build resilience, and meet complex needs, with the aim to enrich the workplace experience.
Shining a spotlight on the ESG framework and the adoption of pioneering technology, the importance of a sustainable workplace is highlighted. Since over 65% of workers are seeking more in-person time with their teams, companies across the globe are investing in green design, tech-enabled features that promote higher health & safety, and wellbeing amenities, among others. Readers can also learn of other crucial factors occupiers are focused on including the right location, DEI initiatives, digital tools, and the precise portfolio mix. Further, as remote work gained momentum and proved to be effective, the big question of which work model augments productivity and business growth is addressed.
Across the APAC region, occupiers are keen on realigning their office portfolios to meet business needs while providing the flexibility employees desire. The right portfolio is key to keeping the culture intact, attracting and retaining the best talent, and controlling operational costs. India has always been a large and growing market when it comes to commercial real estate. Despite the lingering threat of the pandemic, the scare of a recession and geopolitical tensions, the investor sentiment both global and domestic, remains strong. A number of industries including tech, e-commerce, 3PL, consulting and manufacturing have witnessed rapid growth over the past few quarters and are the demand drivers for office assets across the country.
India occupiers quick to adopt flex space
Occupiers in India have been quick to adopt flex spaces, attracted by the flexibility, agility, and cost-effectiveness they offer. Flex spaces are becoming an integral part of occupiers' portfolio, with its share in occupiers' total portfolio rising to 10-12% in 2023, from 5-8% before the pandemic in 2019, as per interactions with industry experts. Going forward, flex spaces will continue to see strong growth, as they continue to support occupiers in realigning their portfolios and space considerations to suit a hybrid working style while leveraging technology & sustainability to improve efficiency and employee experience.
Peush Jain, Managing Director, Office Services, India, said, "Flex spaces have emerged as a core strategy for occupiers to adopt a decentralized workspace model, serving as a promising alternative to the traditional paradigm. As compared to shorter lease tenures of 1-2 years pre-pandemic, occupiers are now going for longer commitments of 3-5 years with flex space operators as they look to integrate flex space as a long-term solution. During 2022, leasing by flex space operators touched 7 mn sq ft across the top 6 cities, the highest in any year. This was a 46 per cent YoY increase led by prominent IT hubs such as Bengaluru and Pune."
As of Q1 2023, India's flex space penetration stands at 6.5 per cent and continues to expand, led by occupiers' rapid adoption of hybrid & de-centralised work strategies in a bid to build new-age workspaces at an optimal cost. Other markets in the APAC region have seen relatively slower growth in flex space, with flex space penetration hovering around 2-4 per cent.
Flex spaces have also provided companies with the agility required to scale operations up or down quickly, allowing businesses to respond effectively to evolving circumstances.