Flex operators capitalize on demand, expand.

Flex Operators Expand Their Footprint and Increase Average Transaction Size

Flex operators have been experiencing significant expansion in recent years, capitalizing on economies of scale and the growing demand for flexible office spaces. This expansion is reflected in the average transaction size, which has nearly doubled to 36,590 square feet in H1 2024 compared to 2015 levels.

Post-Pandemic Shifts in Average Transaction Size

Despite the overall increase, there have been some interesting shifts in average transaction sizes among different cities post-pandemic. While most cities saw an increase, Mumbai experienced a 46% decline, with the average transaction size dropping to 21,550 square feet. On the other hand, Kolkata and Pune witnessed impressive growth, with average transaction sizes increasing by 238% and 219% respectively. Hyderabad recorded the highest average transaction size of 53,210 square feet during the post-pandemic period, representing a 55% increase compared to the pre-pandemic period of 2015-2019.

Expansion of Flex Stock

The post-pandemic period saw a significant shift in demand for flex spaces from start-ups and SMEs to large conglomerates seeking flexibility and cost advantages. This led to remarkable growth in the flex market, contributing to the addition of 27 million square feet of flex space between 2020 and 2023. In 2023 alone, approximately 10 million square feet of flex stock was added. By the end of H1 2024, the total flex stock reached 67 million square feet, marking an annual increase of 25%. However, it’s important to note that flex space still accounts for only 7.5% of the total grade-A office stock in the country.

Future of Flex Spaces in India

With the office market continuing to expand rapidly, it is anticipated that flex stock will surpass the 100 million square feet mark by the end of 2026, accounting for 20% of the pan-India office stock. Shrinivas Rao, CEO of Vestian, acknowledges that Indian flex operators are prepared to cater to the requirements of large conglomerates with the addition of 1.84 lakh seats within a year.

Furthermore, almost half (48%) of the pan-India flex stock is green-certified, emphasizing the environmental consciousness of the country’s large multinational corporations. Additionally, 78% of the flex stock is located in grade-A buildings, ensuring high-quality infrastructure for clients.

Economic and Demand Drivers for Flex Spaces

The increased demand for flex spaces is driven by the significant cost advantages they offer, robust economic growth, urbanization, and stable demand from IT-ITeS companies and start-ups. As a result of this demand, flex operators have strengthened their financials and are now able to negotiate favorable terms with fund houses and banks. With strong revenue streams and ample funds, profitability is on the horizon for flex operators as the demand for flexible workspaces remains high.

Expansion into Tier-2 Cities

While tier-1 cities continue to be major markets for flex operators, tier-2 cities such as Ahmedabad, Jaipur, Kochi, Lucknow, and Chandigarh are also gaining traction. This growth in tier-2 cities can be attributed to improved connectivity due to nationwide infrastructure developments, affordable office rentals, and the ample availability of skilled manpower.

In conclusion, flex operators in India have witnessed remarkable growth, expanding their footprint and increasing transaction sizes. The demand for flex spaces has shifted to larger conglomerates, leading to a significant increase in flex stock. With favorable financial conditions and a strong demand outlook, the profitability of flex operators looks promising. Additionally, the expansion into tier-2 cities showcases the increasing popularity and acceptance of flex spaces as a flexible and cost-effective solution for businesses across the country.

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