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Realty Bytes: Quarterly Flexible Space Take-up In India Increases By 277% Y-O-Y To Reach About 2.9 Million Sq Ft. In Q1 2019

More than 40% of leasing by flexible space operators recorded in Bangalore in Q1 2019

70% increase on a q-o-q basis for the flexible space take up in India
Bangalore and Delhi – NCR were the largest markets for flexible spaces in India, with a combined share of more than half in overall flexible space stock
Hybrid and managed spaces drove flexible space take up with a share of 46% and 36% respectively in Q1, 2019

New Delhi, 7^th May 2019: CBRE South Asia Pvt. Ltd, India’s leading real estate consulting firm, today announced the findings of its latest report titled ‘INDIA FLEXIBLE SPACE QUARTERLY DIGEST– Q1 2019. According to the report, the overall flexible space take-up in India increased by 277% y-o-y to reach about 2.9 million sq. ft in Q1 2019. This represented 70% increase on a q-o-q basis in flexible space take-up. Furthermore, Bangalore and Delhi-NCR were the largest markets for flexible spaces in India, accounting for more than half of flexible space leasing in the country.

Commenting on the findings of the report, Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE, said: “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. We expect that the leasing quantum of this segment would marginally rise from about 7.1 million sq. ft. in 2018 to about 10 million sq. ft. by 2020 and will remain high on the investor radar going forward”.

Hybrid and managed spaces drove flexible space take up, commanding a share of 46% and 36% respectively in Q1 2019.

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

Deal Size	Q1 2018	Q1 2019
< 20,000 sq. ft.	15%	6%
> 20,000 and < 100,000 sq. ft.	85%	47%
> 100,000 sq. ft.	0%	47%

Mr. Ram Chandnani, Managing Director, Advisory and Transaction Services India, CBRE, said, “Technology gave birth to the concept of ‘a liquid workforce’ and flexible space operators are anticipated to embrace it even further for the benefit of their actual customers / end users – employees of the various corporates occupiers. We expect corporates to focus more on tech-related aspects of flexible spaces for optimizing/monitoring space usage along with improving productivity and collaboration. Employees at the same time would be more interested in digitizing amenities and value-add services.”

Overall, a few trends that CBRE anticipates prevailing in this segment in India by 2020 include:

More established corporates to opt for flexible spaces: The optimism of flexible space operators is being fueled by the rising interest of established corporates in this segment. We anticipate that this trend would continue, given the willingness of operators to customise offerings and prioritise member loyalties.

Nichification of product offerings: It has been mentioned previously that various formats of flexible spaces have now started to converge, with an interchangeable set of product offerings such as hybrid spaces. However, while the line may blur between various flexible space types, we anticipate operators to tailor offerings to remain differentiated from close competitors.

Flexible spaces unlikely be limited to office buildings: CBRE’s 2018 report on this segment had highlighted that flexible operators would move to retail spaces as well. This trend has come in greater prominence – operators are now looking at underperforming shopping centers 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.