Bengaluru, popularly known as the Silicon Valley of India, is at the forefront of India’s growth story, driving innovation for the key sectors. The case in point is the real estate sector, especially the Coworking Space and CRE segment which is witnessing a continued forward momentum in the Bengaluru market and continues to maintain the healthy demand-supply equilibrium. It is interesting that within the CRE segment, the city’s coworking spaces are gaining a lot of traction and driving innovation and investments, thus pushing growth for the CRE segment further.
In India, the flex segment has emerged as a prominent asset class, recording a footprint expansion in overall Grade A office leasing shares. It has been recorded that the leasing shares of the flex segment increased from around 9% in 2021 to ~14% in 2022. As per a report, Bengaluru’s office sector recorded a gross lease volume of 3.04 msf during Q2-23, a 35% growth q-o-q, and Flex space operators continued to expand their footprint in the city as the sector contributed 13% share to Q2 GLV.
The key reason can be attributed to the presence of a flourishing IT and Tech start-up ecosystem that need spaces that are not only equipped with modern amenities but also offer flexibility. These new-age enterprises also consider tech enablement to be a priority in their workspaces and hence for them coworking spaces are the perfect options. The coworking operators of Bengaluru are also proactively innovating on the design and experience front. The renowned Bengaluru operators are applying global design principles and aesthetics in the workspaces which are in sync with the redefined workplace strategies of modern enterprises. This is impacting CRE as a whole as the coworking segment is creating a roadmap to develop assets that are future-ready, compliant, and support the evolving needs of today’s occupiers.
Besides, led by post-pandemic market disruptions, operators in Bengaluru have better geographical spread, wider service offerings, and higher allocation for technology investments which also helped in capturing a higher share in the flex inventory. Apart from this the infrastructural growth and emergence of prominent micro-markets also added fuel to the entire momentum. Over the last 2 years areas like Outer Ring Road, Whitefield, HSR Layout, Hosur Road, BTM Layout, etc saw a steady rise of flex leasing with a total of around 92,000 seats being leased to prominent companies.
In the past, co-working spaces in Bengaluru were primarily associated with typical start-ups seeking a balance between flexible rental terms and economical options, aspects that conventional leased offices couldn’t provide. Over time Bengaluru’s emergence as a ‘Global Tech City’ facilitated a transformation of coworking spaces into a collaborative community setting, fostering interaction and growth within the dynamic and innovative start-up community. This shared workspace concept also embraced the vibrancy of its users and consistently led the way in adapting, evolving, and often introducing innovations to work environments, that are perfectly in line with the aspirations and preferences of the talented workforce in Bengaluru.
The financial model of co-working spaces also necessitates generating higher revenue per square foot from their properties compared to their leasing costs. This ongoing drive to surpass market rental rates while staying at the forefront of workplace design to attract and retain discerning occupants also captured the attention of more established and mainstream businesses that are based out of Bengaluru.
In a nutshell, the Bengaluru coworking space segment is rewriting a new story of growth for the CRE segment and at the same time creating unique experiences that are appealing to the evolving aspirations of new-age companies and workers alike. As the city continues to expand and attract more global interest, the flex segment will find itself in a stronger position in years to come, to add new flavors of innovation to the industry.
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