Trends witnessed in the outsourced office sector and how it fared in 2022:
Trend 01:
- Overall leasing activity in India in 2022 at an all-time high, at around 52 to 54 million sq. ft., (CBRE) as compared to about 40 million sq. ft. last year.
- Traditionally, India’s been stuck around the 44 – 45 mn sq. ft. mark in terms of leasing activity.
- Office space leasing making a comeback with the economy opening post Covid. 2022’s leasing figures reinforce the return and growth of demand in this sector.
Trend 02:
- For the first time ever, around 17% of all leasing this year has been from the flex space sector (Colliers – Q3 report)
- Leasing of flex spaces was at around 9% pre-Covid.
Trend 03:
- Post Covid, growing preference for the flex sector among corporates.
- Flex no longer a byproduct or a secondary aspect of office leasing – rather a core part of the office offering today.
- Establishment of flex as a long-term strategy for corporates increasing with time.
Trend 04:
- Witnessing deeper penetration by flex players to get more micro-market coverage within the metro markets.
- Quite a few players in the tier-2 segments now as several corporates have opened smaller centers with coworking providers in tier-2 markets.
- More flex players launching centers in tier-2 markets like Jaipur, Coimbatore, and Ahmedabad, as larger companies are exploring smaller centers in these cities – primarily 50 to 100 / 200-seater offices.
Trend 05:
- Occupation numbers significantly increased across the board for all flex operators, especially the lead players in 2022
- From June to September 2021, occupancy rates were about 55 to 60%.
- Risen to around 75% to 78% this year, which is a significant improvement across the board (coworking & flex spaces together).
Trend 06:
- Consolidation of market share amongst the top 7-8 players, who have all done well and added several centers in different markets.
- Apart from us, WeWork and similar entities like Awfis, Indiqube have become stronger and more entrenched.
- Significant gross absorption of office space by the top 7-8 players across the board.
- The second category of players have witnessed slower demand as the preference for larger offices is getting established among the top 7 odd players.
Trend 07:
- RE Heads of corporates moving towards new age Grade A spaces.
- Companies / larger corporates who were occupying 6-7-year-old centers are looking at moving to newer assets.
- Demand driven primarily by the safety features and amenities available in the newer office spaces.
- Corporates now opting for newer buildings (about 5-6 months old), even at a significantly higher price.
2023: Looking forward
In my opinion, the next year may start off on a slightly challenging note as we are currently witnessing a significant postponement of decision making when it comes to expansion of office spaces. This can primarily be attributed to the fact that a large part of what we cater to is the outsourced IT services demand from large corporates. The recession indications in the US and the European markets are leading corporates to pause their hiring schedules as well as expansion plans for India. However large Indian entities are looking at expanding their portfolio via the outsourced office route. We will continue to see more market share being taken up by the flex sector over traditional leasing because in tougher economic situations, companies tend to outsource more to save on heavy capital expenditure. Outsourced offices are a great proxy for that since the space gets built by somebody else’s balance sheet and the renter can occupy and enjoy the benefits of it. Therefore, this trend is here to stay and will only grow over the next year or two.
In 2023, we will continue to see more consolidation for cities like Pune, Kolkata, Noida etc. Wherever Grade A adequate supply of space is available with price points at sub dollar, we will see increased demand. This includes the likes of Chennai, Noida, and Kolkata.
Simpliwork Offices: Reflecting on 2022, and plans for 2023:
- Increased turnover by close to 72% in 2022
- Added around 1.8 million sq. ft in 2022
- Entering the new year with a book that is 100% more than 2022
- Forayed into Noida, Pune, and Kolkata in 2022
- Fully leased properties: About 160,000 sq. ft in Kolkata and over 200,000 sq. ft. in Noida
- Entered Chennai in December last year and have since doubled footprint with about 150,000 sq. ft.
- Also doubled numbers in Gurgaon in 2022, making it our biggest market.
- Expanded further in Mumbai
- Aim to add about 2 million sq. ft. in 2023, with a net investment of INR 200 – 300 crores.
- Aim to double our capacity in all the new cities that we’ve entered in 2022 and continue looking at opportunistic growth in the other cities.
- Aim to grow about 25 – 30% in the core markets that we are present in, namely Bangalore, Hyderabad, and Gurgaon.
- Will continue to have strong presence in the core micro-markets.
- Will continue to invest heavily in 3 micro-markets – DLF Cyber City (Gurgaon) and Financial District and HITEC City (Hyderabad)
- Certain centres are running at even 120% capacity in the last month as these are double shift offices or 24/7 operations.
- Employee attendance has risen to about 65%, thereby, confirming an increased demand for office space as more employees start returning to office.
- The outsourced office sector is set to witness unprecedented growth over the next few years and we, at Simpliwork, hope to be at the forefront of this disruption.
Finally, as we gear up to enter the New Year – one, full of new hopes, dreams, and possibilities, I would like to take this opportunity to thank all our patrons and friends for their continued support and wish everyone a wonderful and prosperous 2023!