After the epidemic, there has been a surge in demand for flexible office spaces, with big corporations and other enterprises, including start-ups, increasingly choosing coworking spaces. Coworking spaces had a 27% share of the net absorption of over 8.2 million square feet across the top 7 cities in Q1 2023, according to the most recent statistics provided by Anarock. Prior to the pandemic, in Q1 2019, their proportion of a net office absorption of around 9.3 million square feet was just 14%.
Bengaluru and NCR jointly contributed for 66% (about 1.43 million square feet) of net coworking absorption among the top 7 cities in Q1 2023. Around 0.52 million square feet of coworking space were consumed in Pune and Chennai at the same time. The top 7 cities had a 90% increase in net absorption over this time, going from 1.3 million square feet in Q1 2019 to around 2.18 million square feet in Q1 2023, reflecting the general expansion in coworking demand.
Many IT/ITeS organizations increasingly favor flexible spaces over traditional office spaces, with a heavy focus on workplace flexibility for workers, in addition to start-ups and other enterprises.
According to Utkarsh Kawatra, senior director of myHQ (Anarock Group), “The demand for coworking spaces significantly decreased when Covid-19 upset the balance of workspaces nationwide. This negative tendency is now clearly turning around, with coworking becoming more popular due to the disrupted IT/ITeS job environment.
According to Anarock, the fact that coworking spaces are not primarily located in urban areas like traditional office spaces are what makes them so successful right now. Instead, they are proliferating in several places, including populated areas. Even hotels and malls increasingly offer coworking areas, and many big office parks include coworking quadrants. This enables businesses to maintain a strong relationship with their staff and to provide them freedom.
Flexible office spaces cost similarly to traditional office spaces, which typically have lengthy lock-in periods, but enable businesses to deploy immediately without having to worry about office layouts and fit-outs. With low Grade A office vacancy rates and increased demand from start-ups, independent contractors, and corporations seeking to grow, coworking spaces are mushrooming in major cities.
The comparatively low vacancy rates in Grade A offices in IT/ITeS-driven hubs like Bengaluru, Chennai, and Pune have increased demand for coworking spaces.
“This is also the case with Delhi NCR, where low commercial space vacancy levels have fostered a rich growth environment for coworking setups in areas such as Gurugram and Noida,” said Kawatra. “In MMR, corporates looking to aggressively expand and shift their operational divisions to smaller distributed locations are focusing on coworking spaces.”
Top Demand for Coworking in South Cities
The three major southern cities of Bengaluru, Hyderabad, and Chennai had net office absorption of over 4.6 million square feet in the first quarter of 2023. A quarter of this, or 1.19 million square feet, was used by coworking spaces.
In Q1 2023, there was a net absorption of around 1.48 million square feet of office space in the western markets of MMR and Pune. Of this, 24% (or around 0.35 million square feet) was occupied by coworking spaces.
Coworking companies occupied 32% (or around 0.61 million square feet) of the approximately 1.89 million square feet of office space in NCR.
In Q1 2023, Kolkata saw a meager 0.25 million square feet of office space absorbed, of which coworking companies occupied 12% (or around 0.03 million square feet).Benefits of Coworking Spaces
Benefits of Coworking Spaces
Since the epidemic, there has been a “profound change in the perception of offices,” according to Kawatra. “The workplace is now perceived as an environment that must be optimally managed.”
“This calls for a degree of specialization, and flexible space providers fill the void as specialized workplace management companies. We are seeing a growing desire to foster a collaborative work environment that offers the occupier real advantages in terms of price and design.
Many businesses continue to adopt a hybrid working culture that entails establishing smaller satellite offices or remote teams that use nearby on-demand coworking facilities. These use cases are encouraging for the coworking sector.
Future commercial office property developers around the nation are expected to team up with these operators and create specialized coworking spaces for them. Growth will be fueled by the expansion ambitions of key companies and the growing demand for this format from tenants, landlords, and coworking operators.