Flexible space leasing by co-working operators sees 4-fold jump in Jan-Mar: CBRE

Co-working operators have leased 2.9 million sq ft of area, largely office space, during January-March 2019 across seven major cities - a jump of nearly four-fold from the year-ago period, to meet rising demand for shared and flexible workplace, property consultant CBRE said. Co-working players had leased just 0.8 million sq ft space in the corresponding period of the previous year, according to a CBRE report 'India Flexible Space Quarterly Digest Q1 2019'. Most deals by flexible space operators (98 per cent) were closed in office spaces, and the remaining in mixed-use projects in Q1 2019.

"Given that the Indian flexible space market is one of the biggest across APAC, we anticipate that this segment will remain high on the investor radar as well," said Anshuman Magazine, Chairman, India and South-East Asia, CBRE. Magazine expected the leasing quantum of this segment to continue to rise and reach 10 million sq ft figure annually in 2020, from 7.1 million sq ft last year. As per the data, Bengaluru -- a leading commercial real estate market -- saw 1.2 million sq ft of space being lapped up by co-working operators during the first quarter of 2019 calendar year from 0.2 million sq ft in the year-ago period.

In Hyderabad, co-working players leased 0.7 million sq ft space as against nil in the same period last year. The space leased by co-working operators in both Delhi-NCR and Chennai rose to 0.3 million sq ft from 0.1 million sq ft, while in Pune it was flat at 0.2 million sq ft. In Mumbai, co-working entities took 0.1 million sq ft space on lease, a drop from 0.3 million sq ft in the year-ago period. Kolkata saw just 0.01 million sq ft space absorbed in co-working segment.

"Q1 2019 also witnessed flexible space operators shifting focus towards leasing medium to large-sized spaces across cities with both commanding a 47 per cent share in the total leasing activity," the consultant said.

Hybrid and managed spaces drove leasing of flexible space, commanding a share of 46 per cent and 36 per cent, respectively, in Q1 2019. On the outlook, CBRE said it expects established corporates to take up a larger number of seats as compared to start-ups. Operators would emphasise on maintaining healthy levels of occupancy rates, by highlighting on customised services and incorporating tech for enterprise solutions. "Different ownerships, company structures, offerings, funding mechanisms and prices/scale are currently preventing merger and acquisition (M&A) activity. Hence, consolidation is likely to occur at a comparatively slower pace in the country," CBRE said.

The consultant is of the view that flexible space is unlikely to be limited to office buildings and flexible operators would move to retail spaces as well. The co-working operators are now looking at underperforming shopping centres as well as mixed-use (office-cum-retail) developments.

"We further anticipate that operators would also look at semi-investment grade or refurbished options, keeping in mind the location and cost of these properties," it added.