The flexible co-working office market in India is on the brink of significant growth, projected to expand at a stunning CAGR of 21-22% from FY2025 to FY2027. By March 2027, the total area dedicated to flexible workspaces across major cities—including Bengaluru, Chennai, Delhi-NCR, Hyderabad, the Mumbai Metropolitan Region (MMR), and Pune—is expected to surge to approximately 125 million square feet, up from around 80 million square feet as of December 2024, according to insights from ICRA.
Strong Leasing Activity in Flex Workspaces
Leasing dynamics have shown robust performance, with around 13 million square feet of flexible office space absorbed against a supply of 14 million square feet in FY2024. This uptick in demand can be attributed to a rising interest from enterprise clients, start-ups, and domestic corporations. As a result, vacancy rates have significantly decreased, dipping by 300 basis points to 17% in March 2024, down from 20% a year earlier.
- Leasing Details:
- Absorption: ~13 million sq ft
- Supply: ~14 million sq ft
- Vacancy Rate: 17% (March 2024)
Future Projections and Market Dynamics
Despite an anticipated influx of 17-19 million square feet in flexible workspace supply from FY2025 to FY2027, ICRA predicts that vacancy rates will remain relatively stable, hovering between 16.5-17% by March 2025. Expectations suggest that this rate will improve to 15.5-16.5% by March 2026 and March 2027.
Anupama Reddy, Vice President and Co-Group Head of Corporate Ratings at ICRA, noted that the flexible office supply in these key cities has more than doubled from 32 million square feet in March 2020 to over 67 million square feet by March 2024. The forecast suggests a rise to 121-125 million square feet by March 2027.
Rising Demand for Flexible Workspaces
The growing appeal of flexible work environments is attributed to several factors, including the desire for short-term leases, lower initial capital expenditures for tenants, and the overall flexibility these spaces offer. Reddy also emphasized that the share of flexible workspaces in the non-SEZ commercial office sector is projected to increase significantly, reaching 12.5-13.5% by FY2027, up from 5.3% in FY2020.
- Market Insights:
- Share of Flex Workspaces: 12.5-13.5% (FY2027)
- Current Market Share: 5.3% (FY2020)
Consolidation in the Flex Office Market
The flexible workspace sector has seen numerous players emerge in recent years; however, the market remains largely organized. The leading five operators currently control about 40% of the overall flex office space by FY2024. In fact, this sector is on track to witness five major Initial Public Offerings (IPOs) within the next 12-18 months, potentially raising over ₹7,000 crore.
Post-Pandemic Revival of Flex Spaces
The transition toward hybrid work models, along with a demand for varied work environments, has revitalized the flexible workspace sector in 2023 and 2024. As reported, there are now over 450 flexible workspace operators in India, managing more than 2,000 unique locations.
Bengaluru stands out in this landscape, accounting for 32% of the total flexible workspace supply within the top six cities, underscoring its dominance in both commercial office and flexible workspace markets in India.
With such promising trends, India’s flexible office market is poised for an exciting transformation in the coming years, offering a wealth of opportunities for businesses and entrepreneurs alike.
