Flexible workplace segment that is likely to achieve significant consolidation from next year: report
New Delhi, September 1 () The segment of flexible workplaces, which is growing at an accelerated pace in India, could see significant consolidation from next year, as larger operators will seek to acquire smaller ones for the inorganic growth, according to real estate consultant Colliers.
He projected that leasing by operators of flexible workspaces will reach a record 8.8 million square feet in 2019 in the main cities of Bengaluru, Chennai, Delhi-NCR, Hyderabad, Kolkata, Mumbai and Pune.
The lease is expected to represent about 18-20 percent of the total gross lease of office space.
In 2018, the lease by operators of flexible workspaces was 6.8 million square feet and represented 14 percent of the total lease of commercial offices.
We believe that consolidation will accelerate from 2020, as operators of larger flexible workspaces with financial discipline acquire smaller companies for inorganic growth and to enter new locations and acquire scale, Colliers said in a report.
The acquisition would help larger players to offer seats at various price points, giving the occupants greater options, the consultant said.
We have already seen that consolidation begins in the market, with the Indian hospitality chain OYO acquiring the flexible workspace company based in Gurgaon, Innov8 in July 2019, the report said.
Colliers also expects the flexible work segment to continue attracting investments with many key operators in talks with institutional investors to obtain financing.
In India, the consultant said there are about 300 operators of flexible workspaces in India.
The total stock of flexible workplaces is around 17 million square feet, which represents about 3.5 percent of the total commercial real estate stock.
Bengaluru leads the stock of flexible workspace in India with around 6 million square feet. NCR has the second largest stock with 19 percent, followed by Mumbai with 17 percent.
The flexible workspace market in India is transitioning to a higher level of services, reflecting the demand of business occupants for more personalized spaces and customized services, the report said.
To meet the growing demand of companies, flexible workspace operators are leasing larger spaces.
The average size of a flexible workspace has increased 40% in two years to 55,000 square feet in 2019, as operators occupy large spaces and even entire buildings.
As operators pursue the high demand of companies, we note that flexible workspace operators are using a hybrid model to offer flexible workspace options, as well as managed office spaces, in which they offer space solutions Customized office occupants, says the report. Colliers advised operators of flexible workspaces that invest in technology to provide services beyond requests such as cashless payments and seat reservations, among others, to differentiate themselves in this highly competitive segment. MJH MKJ