Demand for flexible office spaces has hit new high notes post the pandemic, with major companies and businesses including start-ups now opting for co-working. Latest ANAROCK data reveals that out of a net absorption of approx. 20.8 Mn sq. ft. across the top 7 cities in H1 2022, the share of co-working spaces stood at 20%. Back in H1 2021, its share was just 6% of net office absorption of approx. 9.33 Mn sq. ft.
In contrast, the share of IT/ITeS sector - India's leading office demand driver - declined from 49% in H1 2021 to 36% in H2 2022. However, this decline is largely because many IT companies are now also preferring flexible spaces to regular office spaces.
In terms of net absorption across the top 7 cities in H1 2022, Bengaluru and Hyderabad remained on top, comprising 50% of total demand share.
Bengaluru, Hyderabad and Chennai - the top Southern cities - together witnessed net office absorption of approx. 12.2 Mn sq. ft. Of this, 18% or approx. 2.23 Mn sq. ft. was by coworking players.
Western markets of MMR and Pune saw net absorption of nearly 5.45 Mn sq. ft. Of this, 27% or approx. 1.5 Mn sq. ft. was by coworking players.
In NCR it stood at approx. 2.75 n sq. ft. Of this, 15% or approx. 0.41 Mn sq. ft. was by coworking players.
In Kolkata, merely 0.4 Mn sq. ft. office space was absorbed. Of this, 14% or approx. 0.06 Mn sq. ft. was by coworking players.
Anuj Puri, Chairman ANAROCK Group, says, "Coworking has received a major boost after Covid-19 disrupted the previous status quo. A major factor driving demand is that these spaces are not concentrated in just the city centres or major employment hubs; they're spread across different areas, including the housing-intense suburbs. Coworking spaces are now also operating out of malls and hotels across cities. Many large office parks are also housing coworking spaces. This helps companies to remain closer to their employees and offer them flexibility."
Another advantage is that with flexible office spaces, companies can plug-and-play at the same cost rather than wrestling with office layouts and fit-outs. The lock-in period for taking up a regular office space is anywhere between 3-4 years. All these factors have also helped boost the demand for co-working spaces.
Backed by rising office space demand, average monthly office rentals are also seen to be rising across the top cities:
NCR and Hyderabad each saw a 5% rise in avg. monthly office rentals in H1 2022 compared to same period in 2021. Currently, the avg. monthly office rents in NCR are at INR 80 per sq. ft. while in Hyderabad it is INR 60 per sq. ft.
Bengaluru and Pune each saw a 4% yearly rise. The avg. monthly rentals in these IT hubs by the end of H1 2022 stood at INR 81 per sq. ft and INR 72 per sq. ft., respectively.
MMR, Chennai and Kolkata witnessed a 2% rise each in avg. monthly rentals in this period. In MMR, the avg. office rentals are the highest among the top 7 cities at INR 128 per sq. ft.; in Chennai they are INR 61 per sq. ft., and Kolkata has the lowest at INR 53 per sq. ft.
Meanwhile, the top 7 cities also witnessed robust new office supply in H1 2022, aggregating to 31.8 Mn sq. ft. Bengaluru, Hyderabad and Pune dominated with a total 74% share. Given the high new completions, average vacancy levels across top 7 cities rose by 2% to stand at 15.95% in H1 2022.