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Tech companies set to drive up demand for flexible office space

Tech companies are expected to drive up their demand for flexible office space as they seek to establish global capability centers (GCCs) with a flexible model that enables them to manage costs effectively in the face of a challenging economic environment, said industry experts.

Some companies that have already set up GCCs include the Commonwealth Bank of Australia, Shell, Microsoft, Persistent Systems, Groww, and Google.

“In a world where uncertainty seems to be the only certainty this has come as a boon to occupiers. Flex continues to be the fastest growing segment in office absorption contributing to over 8.5 mn sqft of the 55 mn sq ft in 2022. Increased emphasis on flexibility & preservation of capital by occupiers has led to the rise of this segment,” said Sarita Hunt, MD (Bangalore) Savills.

As per a Cushman & Wakefield report, GCCs have consistently accounted for nearly one-fifth of all space transacted (gross leasing volume) in India.

Currently, the technology, BFSI, and R&D sectors have been witnessing healthy activity in the GCC space, with large occupiers either establishing or expanding their India centers, with tech-driven cities such as Bengaluru, Hyderabad, the National Capital Region, and Pune attracting a bulk of the GCCs entering India, it said.

“We expect to lease around one million square feet to GCC and large enterprises by the end of March and have seen robust demand last year,” said Kunal Walia, CEO & Founder of Simpliwork Offices, a prominent player in the managed office space segment.

Currently, India houses close to 1,900 GCCs and is counted among the fastest-growing GCC markets in the world.In continuation of the high demand for coworking spaces, 315Work Avenue, a leading new-age coworking space provider, has leased around 40,000 square feet to Webasto Group at CapitaLand IT Park, Kharadi, Pune.

“The demand has also been fueled by the adoption of the hub-and-spoke model across industries to diversify risk and make capex more efficient, which would enable companies to scale up,” said Manas Mehrotra, Founder of 315Work Avenue.

Tech giant Google has also picked up nearly 100,000 square feet of office space in Smartworks’ coworking centre in Pune’s Mundhwa.

“We are seeing strong demand in Hyderabad and Bangalore. Over the next 2-3 years, we expect around one-fourth of our client base to be GCC clients, up from the current 10%,” said Harsh Binani, Co-founder, Smartworks.

Managed space provider Tablespace is also looking to venture into this segment by tying up with vendors across services to help companies set up GCCs.

Apart from the metros, tier-2 cities like Ahmedabad, Chandigarh, Kolkata, Coimbatore, Thiruvananthapuram, and Vadodara are also attracting GCCs.

“ We have built the capability to cater to this rising demand from GCCs, creating a variant of flexible office products with customised layouts, lower lock-in periods, and stringent SLAs. Over the last 12 months, we have successfully delivered over 1 mn+ sq. ft. to enterprise customers, demonstrating our ability to meet the specific needs of businesses,” said Sumit Lakhani Deputy CEO Awfis space solutions.

According to estimates, flexible office spaces are expected to grow by an average of 15-20% per year over the next three to four years. Led by rising demand from larger enterprises, this segment is likely to move towards 5% of total office stock, pushing its total market size to around 51 million sq ft by 2023, the report said.

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