Mushrooming Flex Segment in Non-Metro Cities

Welcome aboard to the Corporate Realty Roundup Newsletter, where we will chart the course of how corporates lease offices, commercial real estate trends and business growth. The landscape of workspaces is undergoing a rapid transformation, and our newsletter aims to be your compass in navigating these exciting changes!

Flex operators have secured an impressive 1.6 million square feet of office space across top 10 non-metro cities in 2023 alone. This surge in demand shows a significant trend in the evolving workspace landscape, highlighting the increasing preference for flexible and adaptable office solutions beyond major metropolitan areas. Big trend? Let us dive further into this!

How did this shift take place?

The pandemic outbreak precipitated a seismic shift in global work culture. Hub offices, spoke offices, remote work, and hybrid models swiftly became the standard rather than the exception, compelling businesses to reevaluate their office space requirements. Consequently, the flexibility provided by managed offices, and other adaptable workplace solutions emerged as indispensable necessities for companies.

The shift in demand presented an opportunity for flex space operators to expand into non-metro cities. Factors such as reverse migration, talent retention across regions, a lower cost of living, and state government infrastructure investments are expected to enhance the standard of living in these cities. As businesses increasingly establish offices in non-metro areas and seek cost-effective solutions, the allure of these emerging markets continues to rise.

Coworking and managed office operators began to recognize the untapped potential of Tier 2 cities and started expanding their operations beyond the metros. Simultaneously, advancements in technology with platforms like myHQ and Upflex India streamlined the operation of flex spaces, empowering operators to efficiently manage their facilities.

CBRE reported that cities like Chandigarh, Jaipur, Coimbatore, Kochi and Indore have flex stock between 0.3 mn - 0.5 mn sq ft.

“Our priority is to deepen the penetration in existing markets and enter new cities with focus on tier-II locations. In the next one year, we will strengthen our presence by foraying into cities such as Chennai, Kochi, Indore, Ahmedabad, Peshawar and Jaipur while adding more centres in Chandigarh. We will have at least two centres each in Ahmedabad and Kochi. We want to take our seat capacity from 25,000 to 40,000 in next one year by creating presence in 15 cities."?

• Amit Ramani , Founder & CEO at Awfis

Major micro-markets in non-metro cities

1. Ahmedabad boasts micro-markets like Ashram Road, Chimanlal, and Girdharlal Road, known for their office spaces. Strategic locations include SG Highway, Prahlad Nagar, and Corporate Road, while emerging hubs like GIFT City and Mindspace SEZ are attracting global technology and BFSI occupiers.

1. In non-metro cities like Chandigarh , key micro-markets include Central Chandigarh, Mohali - Sectors 66 & 67, and Industrial Area Phase I & II. Major office occupiers in Chandigarh comprise IBM, Teleperformance, and Concentrix, alongside notable startups like Evage Motors and Ayu Health.

1. In Coimbatore , significant micro-markets are located at RS Puram, Gandhipuram, Avinashi Road till Lakshmi Mills, Trichy Road, and Saravanampatti. The Pollachi Road micro-market, situated near Eachanari, is dominated by MSMEs, with an L&T project expected to be operational by 2026. Avinashi Road, TIDEL4.4 Park, and the Airport are emerging as commercial hubs, with large IT occupiers showing a preference for the TIDEL Park office development.

1. In Thiruvananthapuram, micro-markets such as Kazhakoottam, Chacka, and Pallippuram are gaining prominence. Meanwhile, MG Road, Pattom, Palayam, and Thampanoor offer suitable spaces for client-facing firms, including banks.

But is the Tier 2 breakthrough a short-lived fad or an upcoming industry trend??

In 2023, the new flex stock amounted to 8 million square feet, with an impressive 1.6 million sqft contributed by the top 10 non-metro cities. While the growth of flexible workspaces in non-metro cities is indeed promising, it's crucial to contextualize these figures.?

Presently, non-metro cities represent less than 7% of the total cumulative flexible workspace market. However, with an aggressive growth forecast of 30% for non-metro cities, we anticipate a significant contribution from this segment to the market's overall expansion in the years to come.

What lies ahead?

Looking ahead, with employees wanting to migrate back and work near home, a new trend emerges. This shift in preference, along with the existing demand for office spaces and corporates inclination towards non-metro cities, highlights a promising future.

With the government's focus on bolstering social and physical infrastructure, non-metro locations are becoming increasingly attractive for businesses and talent. This trend, alongside investments from prominent developers such as DLF, Embassy Group, Brigade Group, Prestige Group, and L&T, sets the stage for significant growth.

As global and domestic occupiers increasingly turn their attention to non-metro cities, the demand for modern office spaces, including flexible workspaces, is expected to soar. This surge in demand is likely to result in the amalgamation of supply and demand, leading to an increase in the presence and usage of flex spaces in non-metro cities in the future.

The workspace domain is evolving rapidly, and so are we! Subscribe to the Corporate Realty Roundup Newsletter to delve deeper into commercial real estate, collaboration, and the evolving landscape of business growth.

We value your feedback. Your suggestions will help shape our future editions to better meet your needs. Stay tuned for our next edition, packed with more insights, success stories, and expert advice.