The growing number of startups and adoption of hybrid work model are causative factors, says Anshuman Magazine
The growing number of startups and adoption of hybrid work model are causative factors, says Anshuman Magazine
Flexible workspaces, once considered a niche offering, has become an important part of building owners’ and corporate occupiers’ real estate strategies due to large-scale adoption of hybrid work model. Post the pandemic, the use of flexible spaces in commercial real estate portfolios is becoming more prominent in the long term. The flexible space stock in India is expected to grow from close to 29 million sq. ft. in 2020 by 28% y-o-y to touch 47-48 million sq. ft. by 2022.
The ‘startup’ effect
We are witnessing a startup boom in India (and globally). The startup ecosystem has created as many as 14 unicorns in the first three months of 2022, and for the third consecutive quarter, they have received over $10 billion across 334 funding deals. Early-stage startups often lack the requisite capital and credit-rating to rent traditional office spaces, which in turn made flexible workspaces popular. For the better part of the last decade, landlords discredited this large and growing share of the office market that the sector could potentially demand. Going back to 2019, exacerbating landlord problems, vacancies increased as businesses opted to downsize footprints – in hope of lowering operational costs and meeting the requirement for hybrid-work. Driven by this change and influenced by the ‘Startup’ culture, many landlords were challenged by a new breed of office providers who were willing to meet the growing demand for collaborative, amenitized, managed, scalable, and flexible office spaces.
Flexible workspaces provide startups the benefit of no upfront CAPEX, cost saving, operational outsourcing, data security, customisation & branding, and access to amenities which otherwise they would not have had in case of their own office set-ups. This forms a cost-effective solution for small/variable headcounts of early-age startups, allowing organisations to focus on improving operations through better collaboration & productivity. Also, enabling them to channelise their time and efforts on their core business. Flex workspaces also facilitate remote hiring from Tier-II and Tier-III cities, hub-and-spoke model within a city, co-working and remote-first models. Agility and flexibility will continue to be the pillars of startups across stages and the realty sector is all set to welcome this revolutionary change.
The perception shift
Landlords & developers, who until recently were not forthcoming in leasing spaces to startups owing to lower business viability, are now viewing startups from a different lens. They have now actioned to cater to the evolving market; a trend that is likely to drive growth within the office segment.
The increasing number of startups is creating avenues for more Flexible Workspace operators and Flexible Workspace supply. Increase in hiring and technology adoption is playing an important role in accelerating growth of flexible workspaces.
To cater to startups, flexible space operators can also be expected to differentiate themselves by providing more premium service offerings featuring advanced technologies, wellness and the evolving needs of the segment. With greater ‘hybridization’ of work, there is more anticipated investment in managed workspaces.
What’s next?
While prior to the pandemic, startups used flexible spaces mostly for smaller size /short- to medium-term real estate capital light needs, post the pandemic, the use of flexible spaces in their real estate portfolios is likely to become more prominent in the long term and large format requirements as well. We have already started seeing unicorns occupy large spaces (upwards of 1,000 seats) in prominent tech park across the country.
With the volatility brought about by the pandemic, flexible workspaces have been a preferred and practical choice for startups to ensure resilience and growth. Earlier considered a feasible choice for only startups in their nascent stage, flexible working is now being adopted by established organisations globally as well. Moreover, as collaboration at the workplace, community, and networking forms the essence of startup culture, the startups will increasingly choose flexible spaces for the value offered.
(The author is Chairman & CEO, India, Southeast Asia, Middle East & Africa, CBRE)
***
