04 February 2022

Flex spaces in demand

The Hindu Business Line

India’s flex space is expected to see major expansion in Tier-II cities in the coming years. According to a JLL-Awfis Report titled “Flex your Workplace”, 48% of respondents/occupiers who already have a presence in Tier-II cities want to further expand. Not just that, 78% of these occupiers are expected to expand within the next one year, with 84% wanting to utilise flex spaces. The story is almost similar for players who do not yet have a presence in Tier-II cities. Even among those who did not have a Tier-II city office footprint, 34% of companies had employees working from such locations. While 47% of the respondents had a presence in Tier-II cities, one-third of those were medium to large companies with employee strength of 3,000 or more. Increasingly, domestic tech firms who are targeting the interiors and cities/towns beyond the metros for business expansion opportunities are looking to create regional offices. Such growth plans will need flex operators as they will become the enablers for providing quality workspaces with quick turnaround time for such organisations.

“Times have changed, so have offices. Today’s offices are more flexible and can accommodate the changing needs of their employees. Going flex or hybrid is one way to ensure that talent stays. Through the pandemic, flex has remained resilient. Given the new realities, it’s now a crucial part of occupier real estate strategies. While 75% of the flex portfolio, on average, is still in Tier-I cities, the hybrid model is fostering growth of flex operators in Tier-II cities as well. We expect demand for flex spaces to continue to rise in the metros, and the Tier-II cities will witness tremendous growth. Driven by reverse migration, focus on talent across regions and cost of living, the Tier-II market is perfectly poised to witness a significant upswing in hybrid workplaces,” said Radha Dhir, CEO and Country Head, India, JLL.

Large enterprises have accounted for 50% of the demand for flex seats in the last couple of years. This demand driver will be key to the market’s continued growth as enterprises look towards portfolio optimisation due to changing employee needs which are driven by flexibility in work patterns. The average lease size has been in a steady range of between 52,000-56,000 sq. ft over the past four years. While leasing volumes tapered off in 2020 and 2021, enterprise-led flex deals ensured that transaction sizes remained within range. The average deal sizes for enterprise providers were 15-20% higher than the overall average.

“India’s flex space footprint across the top seven cities has grown by 525% over the past five years and now stands at 38 million sq. ft with operational flex seats exceeding 550,000. Even during COVID, while 5 million sq. ft of flex space was closed, the segment has reinvented itself and the growth is now being fuelled by enterprise demand for managed workspaces,” said Samantak Das, Chief Economist and Head of Research & REIS (India), JLL. “Our survey results also show that Tier-II cities are gaining momentum with occupiers looking to enhance their presence, given the business opportunity in the interiors and talent availability in these cities with the reverse migration seen post-COVID,” he added.

The total flex stock is at 38 million sq. ft which includes over 5,50,000 operational seats. Among the top-7 cities, Bengaluru is the clear leader accounting for 34% of the total flex stock. Large enterprise deals, over 1000 seats, account for about 36% of total market activity since 2020.

The current flex market penetration in total office stock of top-7 cities stands at 3.5%. India’s average penetration rate for the top-7 cities could reach around the 4.0-4.5% mark over the next two years. This will largely be driven by Bengaluru which is already at par with more mature markets with a 5% penetration rate and other gateway cities such as Mumbai and NCR which have witnessed healthy growth. Pune and Hyderabad will also see remarkable growth in coming years.

With COVID being the chief reason, 2020 saw only 4.4 million sq. ft added to the flex stock, down by 58% in terms of activity levels. The second wave in 2021 also impacted the market and it will close out on similar number as of 2020. However, the growth plans seen over the past two quarters bode well for the sector’s growth. The share of flex space in total Grade A office space leasing in the top-7 cities in 2019 hit a high of 16%, a year of historic highs for the Indian office markets. It dipped to 9% in 2020, before reaching 13% again in the first three quarters of 2021, though the absolute numbers remain off the previous highs.

“For a variety of motivations including the need for shorter leases, an ever more mobile workforce and greater caution by companies in making capital expenditures, tenants are increasingly requiring flexibility in lease terms, especially as they await greater clarity in business conditions and workplace strategies. With the pandemic exacerbating uncertainty, tenant sentiment now indicates that flexible space adoption is set to accelerate substantially as demand shifts from fixed long-term commitments to more agile and hybrid options. This shift toward greater flexible space requirements is seen as a structural trend and not just in response to the pandemic, and landlords will need to adapt to tenant demands for increased flexibility. Moving forward, flexible workspace is likely to grow from a low proportion of the overall market to a critical and mainstream element of commercial real estate,” said Amit Ramani, Founder and CEO, Awfis.

The events of the past 24 months have had a seminal impact on the way we will live, work and play. The silent change revolution currently ongoing in the workplace and driven by employees exercising their choice will direct the course of the flex space market as well. With occupiers looking at their real estate portfolios in terms of cost optimisation and also integrating greater tech and sustainability features, flex spaces will also keep pace with such demands. Flex operators who have achieved scale and adequate funding will be at the forefront of driving portfolio synergies for both occupiers and landlords.

This article was originally published on 17 December 2021 at : Flex spaces in demand – The Hindu

28 March 2023

Focus on Tier-II markets. Awfis Space expands operations in Kochi

Posted by Awfis Editorial

Post Covid, Awfis see rise in co-working space; intents to open 1,000 centres across the country in the next five years

Flexible workspace provider, Awfis Space Solutions based in Delhi has expanded its operations in Kochi as part of strengthening its presence in Tier II cities.

Amit Ramani, Founder & CEO, Awfis said that the company is strengthening its foothold in the southern market with Kochi as the city still welcoming branded co-working players. The company aims to meet the burgeoning demand for workspaces in Tier II markets and the Kochi centre comprises 650 seats at Mezhukkattil Matrix.

He pointed out that there has been a steady growth in co-working space in the country, especially after Covid, touching 70 million sq ft from 25 million sq ft two years back. The industry is growing at a CAGR of 25 per cent and the company intends to open 1,000 centres across the country in the next five years, he said adding that there would be 200 centres by March next year.

At the back of strong demand for flex workspaces, Awfis has now built 150 centres and 88,000 seats across 17 cities, he said.

Sumit Lakhani, Deputy CEO, Awfis said that the foray in Kochi is a testament to the growing demand for flexible workspaces in Tier II markets as Indian corporates and MNC’s facilitate hybrid working and work near home for employees.

This story appeared in the 10 November, 2022 issue of The Hindu Business Line and was originally published at: Focus on Tier-II markets. Awfis Space expands operations in Kochi

04 August 2022

Return to office highest in telecom, consulting sectors; IT lags: Survey

Posted by Awfis Editorial

Majority of employees in telecom and consulting sectors have returned to office with significant fall in Covid-19 cases but the IT sector is lagging, according to a survey by Colliers and Awfis.

Property consultant, Colliers India and co-working operator, Awfis’ joint report explores the status of return to work across different sectors.

Post third wave

“As the third wave of Covid-19 started waning in February, the return-to-office gained momentum. As a result, by June 2022, 34 per cent of the companies saw 75-100 per cent of the employees back in office,” the report said.

About 41 per cent of occupiers stated 25 per cent of their employees have returned to office.

The survey showed telecom and consulting sectors saw the highest (75-100 per cent) rate of return to office while IT and new technology companies saw the lowest (0-25 per cent).

Distributed workspace strategy

“The survey has made it clear that a distributed workspace strategy is the way to go for occupiers in this new era of experiential workplaces, as occupiers emerge from the after-effects of the pandemic. Flex spaces, in particular, are leading this growth, as occupiers from varied sectors are housing teams in flex centres across cities,” Colliers India, CEO, Ramesh Nair said.

Flexible workspace operators leased about 3.5 million square feet of office space in January-June this year across six cities, almost three-fourths of the flexible space leasing in entire 2021, he added.

Survey results

The survey was conducted during May-June among occupiers to understand their strategies regarding distributed workplace. The respondents were from IT/ITeS, BFSI, engineering and manufacturing, and others.

Total 150 responses were received from Founders, CEOs, COOs, and CHROs of various companies. The company size of the respondents varied, starting from a range of 1-500 employees to companies having over 10,000 employees.

As per the survey, about 74 per cent of the occupiers are likely to adopt distributed workspace while 53 per cent of occupiers prefer working from home plus office as their preferred workplace portfolio strategy.

About 49 per cent of the occupiers are likely to adopt flex centres to enable distributed workspace, followed by setting up their own offices in metro and non-metro cities.

Flex spaces

The consultant sees opportunities for flex spaces not only in metro cities but also in non-metro cities. “In fact, in non-metro cities, total flex spaces are likely to grow more than two-fold to 5.5 million square feet by the end of 2022,” Nair said.

Amit Ramani, Founder and CEO, Awfis said the findings of the survey are a testament to the success of the distributed work model and subsequently of flex spaces in catering to the ever-evolved workspace needs of India Inc.

“Going forward, 77 per cent occupiers will include flex spaces as part of their workplace strategy. We expect exceptional demand in the future, driven largely by large corporates for de-densification of existing traditional offices,” he added.

Office leasing

According to the Colliers India data, the gross leasing of office rose to 32.9 million square feet in 2021 from 30.1 million square feet in the previous year. During 2019, the numbers stood at 44.8 million square feet across Delhi-NCR, Mumbai, Bengaluru, Chennai, Hyderabad, and Pune.

In the first six months of this year, the office leasing has risen to 27.5 million square feet from 10.3 million square feet in the year-ago period. The share of leasing by flexible workspace operators stood at 13 per cent.

This story appeared in the 4 August, 2022 issue of The Hindu Business Line and was originally published at: Return to office highest in telecom, consulting sectors; IT lags: Survey

18 April 2022

Co-working space rentals firming up to pre-Covid levels

Posted by Awfis Editorial

Tier-II markets witnessing traction

Co-working space rentals have gone back to pre-Covid levels driven by short supply coupled with an increasing demand from Tier-II markets. Price corrections, an 8-10 per cent upward movement, is expected in the coming quarters as “back to office” picks up and hybrid work models gain popularity, says Amit Ramani, Founder and CEO, Awfis, the country’s largest co-working space provider.

Segment rentals have averaged out to ₹9,000–₹10,000 per seat per month on a pan-India basis; with some micro-markets witnessing rise in rentals. For instance, a short supply in the prime Bengaluru market has led to firming up of rentals by approximately 20 per cent over the last few months.

“Post-Covid wave 1 and wave 2, we had people approaching us for discounts or lowering of rentals. But now rents are firming up to pre-Covid levels. And in another few months, we are anticipating an 8-10 per cent increase driven by increased demand,” he told BusinessLine.

In the Gurugram micro-market, the rentals have firmed back to ₹6,000–₹7,000 per seat per month; up from the sub-₹6,000 per seat per month levels.

Demand continues to be strong across segments which range 15-500 seats. While SMEs look at 10–100 seating options, start-ups look for anywhere between 50 and 60 seats.

Awfis, which has a portfolio of about 5 million sq ft of space across over 120 properties (mostly under straight lease, rent-sharing or profit-sharing models); and it includes over 70,000 seats. The portfolio is spread in an 85-15 ratio between Tier-I and Tier-II locations.

Tier-II demand

According to Ramani, hybrid work models have already given rise in demand for co-working spaces in Tier-II markets. Coming on the back of a lower base, growth in these markets are faster at the moment.

Awfis, on its part, is adding spaces in new smaller markets such as Chandigarh, Lucknow, Coimbatore, Indore, Bhubaneswar, Jaipur and Nagpur.

“There are some people who have moved back to their hometowns and now prefer a flex work space there. Hence, we see improving demand in larger Tier-II markets,” he added.

About 30 mn sq ft office space in India are occupied by co-working or flex players and a large share of this is occupied by start-ups, say sources.

IT and ITeS continue to be amongst the main drivers of flex or co-working space in India.

Listing plans

Awfis, Ramani said, would look at going public over the next couple of years as it expands its presence to nearly 200 properties. It has been EBITDA positive since 2018, with EBITDA being in the 7-8 per cent range.

“Ideally, we would look at a presence across 200 sites and an EBITDA level of 20 per cent in the next two years, before taking the company public. Our burn continues to be small since we are an asset light model, that is, we do not own the properties ourselves,” he said.

This story appeared in the 11 March, 2022 issue of The Hindu Business Line and was originally published at : Co-working space rentals firming up to pre-Covid levels- The Hindu Business Line

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