Pune Leads the Way: Coworking Drives Commercial Real Estate Resurgence
Pune, 28th August 2023: The fiscal year 2022-2023 saw the Indian commercial real estate sector navigating a rollercoaster ride of highs and lows, primarily influenced by the global economic downturn. While the initial half of this period displayed promise, it was later marked by the ripples of a recession in key global economies. This economic climate led companies to exercise caution in leasing extensive corporate spaces, subsequently causing a slowdown in the growth of the commercial office segment.
Finding Opportunity in Flexibility
Amid the contraction of the conventional office real estate market, the burgeoning coworking sector emerged as a beacon of hope. As businesses worldwide aimed to trim costs, coworking spaces excelled in providing adaptable, scalable, and enterprise-grade solutions to companies reconsidering their strategies.
The Covid-19 pandemic disrupted the traditional office work model significantly. Despite experiencing the freedom of remote work, many individuals eventually yearned for social interactions and collaborations. Concurrently, several companies discovered the advantages of avoiding exorbitant permanent office rents.
The hybrid work model emerged as an ideal compromise, and flexible office spaces became instrumental in facilitating a resurgence of occupiers.
ANAROCK Research data indicates a notable 12% decline in conventional office leasing activity during the current fiscal year (FY23), in comparison to the peak year (FY20) when leasing reached 43 million sq. ft. across the top 7 cities. In FY23, leasing in these cities totaled around 36.11 million sq. ft.
Against the backdrop of declining conventional office leasing, coworking spaces displayed remarkable resilience. The share of flex office spaces in overall office activity surged to 23% in FY22-23 – an 11% increase from the 12% share in FY20. This substantial growth of 11% marked the highest expansion rate across all office segments.
Cities Leading the Trend
Pune took the lead, with coworking spaces contributing to 40% of the transaction share in the ongoing fiscal year. Following closely, Bangalore saw a rise in net absorption of coworking office spaces to 30%. Impressively, Bangalore’s coworking spaces and the IT/ITeS industry emerged as market leaders, accounting for 33% and 29% of the city’s commercial space demand, respectively.
This trend extended beyond Bangalore. In Kolkata, flexible office spaces also commanded a considerable share of transactions as more businesses sought adaptable alternatives to fixed office expenses.
During FY23, IT/ITeS occupiers dominated the Kolkata office market, claiming a substantial 36% transaction share. In a similar vein, coworking spaces secured a 21% share of the city’s office leasing activity, underscoring their rising popularity and demand in the City of Joy.
Envisioning the Future
The coworking sector’s impact is poised to amplify in the future, driven by the fundamental transformation work dynamics have undergone, which is unlikely to revert. The alterations in how India Inc. perceives office work in a post-pandemic era are irreversible.
Many companies that insisted on an immediate return to the office now rue their decisions, stemming from an inability to adapt to changing circumstances. In the IT/ITeS sector, substantial layoffs have been paralleled by significant attrition rates. Attempts to revert to the familiar ‘old normal’ have often yielded detrimental outcomes.
