The first quarter of 2023 saw flex space operators inch closer to technology companies in terms of leasing, accounting for 20 per cent of the total leasing across the top six cities, just behind technology’s 22 per cent. The two sectors together accounted for nearly 42 per cent of the total leasing during the quarter.
Bengaluru and Delhi-NCR were the most preferred locations for top flex space operators for their portfolio expansion.
Occupiers continued to blend their conventional real estate portfolio in a bid to control costs while providing convenient ways to work for their employees.
“Share of the Technology sector has declined steadily from 34 per cent in Q1 2022 to 22 per cent in Q1 2023, as corporates continue to focus on building in operational efficiencies through a hybrid model. While Hybrid working has impacted demand for conventional office spaces, it has also fueled demand for flex spaces across top markets. As long-term growth drivers for the tech sector remain strong in India, the sector will continue to drive office leasing activity through a mix of conventional and flex spaces,” says Peush Jain, Managing Director, Office services, India, Colliers.
Flex spaces offer flexible lease terms, lower capex, and modern workplace designs, which have attracted large technology occupiers, coupled with ongoing recessionary conditions and layoffs in the technology sector, leading to a relative pushback in conventional leasing by these occupiers.
In addition, leasing activity softened by 19 per cent YoY due to cautious decision-making by occupiers amidst continued economic uncertainties. However, leasing activity is expected to pick up towards the latter part of the year, driven by strong growth fundamentals.
“Although office absorption is currently facing temporary downward pressures, leasing activity will likely pick up, especially towards the latter part of the year, driven by strong growth fundamentals. Large ticket deals continue to reflect its stronghold contributing to 50% of the total leasing of the quarter signalling positive market sentiment. From a supply perspective, while there is a robust supply pipeline, developers will likely remain cautious and avoid bringing in speculative supply,” says Vimal Nadar, Senior Director and Head of Research, Colliers India.