The Flexi Office Is Back In Business
The outbreak of COVID-19 pandemic may have put brake on the growth of Indian flexible workspace market but the medium to long term outlook for this segment remains optimistic Leading international property consultant JLL India recently came out with a report “Reimagine Flexspaces, A 360⁰ view” that forecast 15-20 per cent growth in this emerging segment for the next 3-4 years. The share of flexible workspace in India’s total office stock is expected to rise to 4.3 per cent by 2023 from the current 3 per cent. Over 50 million sq ft area will come under flexible workspace by then as cited in the report.
If anything, market experts believe this pandemic dented segment stands to gain in the coming years with the massive shifts in the way people work today, then they did 9 months ago. This coupled with corporates looking to cut flab and capex on setting up their own offices spells a brighter future for the flexi office.
The new strategy
It’s now established that businesses are most likely to consider adopting hub and spoke models for smooth functioning. This can best be fulfilled by going flexible. According to JLL, large corporates, both domestic and MNCs, will drive growth in the flexible workspace.
De-densification of office space, expected at least in Grade-A buildings, will also have a positive impact. The two major developments during this pandemic also reinforces the growth potential of flexible workspace. One is WeWork Global infusing USD 100 million to pick up stakes in WeWork India and the second is acquisition of CoWrks by Canadian investment firm Brookfield.
Having said that, the COVID-19 pandemic has definitely forced players operating in a flexible workspace to rethink their business model. Like corporates, co-working operators are also looking to cut costs and adopt a revenue share model with building owners.
WeWork India has already announced that it will first find clients and only then search for real estate. Reinventing themselves, many co working operators are coming out with innovative offerings, like helping corporates in providing adequate physical and IT infrastructure for their employees to not only support work from office, but also support work from home in the times of hybrid models.
In the overall Indian office market, there have been several positive developments during this pandemic, signaling that the office market remains resilient and a long term bet for international investors.
Bengaluru-based RMZ sold its large portfolio of commercial assets, including co-working business CoWrks, for over Rs 14,000 crore to Brookfield
Another leading player Prestige group has signed term sheets with Blackstone to sell its commercial assets for over Rs 9,000 crore. Recently, Embassy group and Blackstone sold Embassy TechVillage for nearly Rs 9800 crore to Embassy Office Parks REIT.
These three big-ticket commercial real estate deals, amid the COVID-19 pandemic, demonstrate the inherent strength of Indian office market.
To encash this opportunity and monetize assets, Brookfield have filed documents with market regulator SEBI to launch its initial public offer for its REIT (Real Estate Investment Trust). This will be India’s third REIT if its IPO becomes successful.
Embassy Office Parks REIT, sponsored by Blackstone and Embassy group, was the first to list its REIT in April last year, followed by K Raheja sponsored Mindspace which raised Rs 4,500 crore through REIT public issue amid pandemic.
India’s largest listed real estate firm DLF has also started the process to become ready internally to launch the REIT of its rental arm DLF Cyber City Developers Ltd (DCCDL). It targets to become REIT-ready by the end of 2021 after which a decision would be taken to launch the public issue.
So, the office market has continued to attract huge investment notwithstanding this pandemic.
Developers who have monetized their commercial assets will use funds to reduce their debt and also develop greenfield projects to meet the rising demand of premium office space by India’s fast-growing IT ITES services. All of these are strong signs for the longevity and the growth potential for credible flexible workspace providers. A continuous supply of GRADE-A office space, along with flexi office space needs of corporate occupiers means good days are ahead.
Written By Ashwini Kumar Sharma
Read more here:
Flexible space market to cross 50 million sq ft by 2023: Report
Big real estate deal shows office isn’t going away
Global funds lap up office property in Bengaluru
Co-Working Market Suffers During Pandemic But There’s Hope
WeWork Global to invest $100 million in WeWork India