REALTY BYTES: Flexible space take-up in India touched 2.0 million sq. ft. in Q3 2019

• Overall leasing in 2019 YTD stood at 7.2 million sq. ft
• Flexible space stock crossed 65 million sq. Ft. in APAC, 25* million sq. ft. in India
• Mumbai, Bangalore and Hyderabad accounted for about 70% of the office space take-up
• Bangalore dominated the flexible space stock, followed by Delhi-NCR and Mumbai
• Driven by hybrid space operators, medium sized deals dominated leasing activity

New Delhi, 21^st, November 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 Digest – Q3 2019’. According to the report, the overall flexible space take-up in Q3 2019, stood at 2.0 million sq. ft.

In Q3 2019, Mumbai, Bangalore and Hyderabad accounted for about 70% of office space take-up. Bangalore dominated the flexible space stock, followed by Delhi NCR and Mumbai. Flexible space penetration was the highest in Delhi NCR and Bangalore; Mumbai and Pune displayed similar penetration patterns similar to Hyderabad.  

Commenting on the findings of the report, Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE, said: “We expect that landlords will increasingly cater to occupier interest by providing space-as-a-service on demand. 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 thus expect flexible space leasing to be around 9 mn. sq. ft. in 2019 and around 9-10 mn. sq. ft. in 2020.”

Bangalore dominated the flexible space stock with 7.8 million sq. ft., followed by Delhi-NCR and Mumbai, with 6.7 million sq. ft. and 4.6 million sq. ft respectively. Flexible space penetration was highest in Delhi NCR (6.1%) and Bangalore (4.6%), followed by Mumbai, Pune and Hyderabad at 3.7%, 3.8% and 3.5%, respectively.The number of small- to- medium-sized deals (20,000 - 100,000 sq. ft.) rose from 49% in Q2 2019 to 54% in Q3 2019. However, the number of large-sized deals (exceeding 100,000 sq. ft.) dipped from 14% in Q2 2019 to 12% in Q3 2019.

Mr. Ram Chandnani, Managing Director, Advisory and Transaction Services India, CBRE, said, “On an average, deal sizes were larger in India as compared to APAC in Q3 2019.” Q3 2019 also witnessed an increased inflow of funds with about USD 100 million of funding provided by angel investors / PE funds / debt funds. Going forward, it is expected that corporates will increase the share of employees using flexible spaces, likely to be fuelled by Gen Z / millennial preferences.”

Some of the key trends witnessed in 2019 YTD in India:

Adoption of Tech
In addition to launching individualised apps which allow tenants to book / modify requests for varied services such as conference room booking, private desk booking, community /event booking and cab / food booking; many operators are adopting specific apps that provide intergroup social platforms where occupiers can post business requirements and conduct operations. An innovative upcoming example of tech incorporation is of a managed space operator planning to introduce robotics across their centers in the coming quarters.

Amenitisation
Flexible space operators are now going beyond providing the usual amenities to improve employee experiences with amenities such as such as café, gym, etc. Many are tying up with cab service providers, restaurants / online food chains and other online e-retailers.

Mergers and Acquisitions on the rise
After the Oyo-Innov8 deal, flexible space operator CoWrks acquired UnCube.

OUTLOOK
Corporates are expected to increasingly adopt flexible spaces within their RE portfolios as they would progressively try to engage employees by providing multiple space options. providing multiple space options. This would mean increased access to various locations in the operator portfolio depending on their location, seating and workplace environment preferences.

Apart from tier I cities, flexible space operators are expected to compete for high-quality large-sized spaces, increasingly pre-leasing space in quality, investment-grade developments or look for semi-investment and second-generation spaces. Operators are now expected to now consider newer, smaller markets as well as concentrate on improving efficiencies within the existing centers.

Securing flexible space operators as tenants is the most direct approach, although landlords wishing to exert greater control over their end-user profile, services and experience can create and operate their own flexible space platforms as an amenity and component of their overall portfolio. Acquisitions may also happen due to large operators' intent to magnify or diversify their portfolio.

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