by THO
Flexible workspace operators are recognizing the real estate potential of Tier II markets and are rapidly expanding their presence, providing options for start-ups and established firms. Ahmedabad has the highest flex stock, with more than 0.5 mn. sq. ft as of September 2023, a report by CBRE titled The Office Sector’s Ascent: Tier-II Cities on the Horizon has said.
Looking ahead, information technology (IT) and technology companies are expected to be at the forefront of this shift towards smaller cities. There may also be a surge in the number of companies setting up their global capability centers (GCCS) in select tier-II cities, said the report.
Nearly 26 major flex office operators recorded presence across 10 tier-II cities in 2023. These 10 cities include Chandigarh, Jaipur, Lucknow, Coimbatore, Kochi, Thiruvananthapuram, Visakhapatnam, Ahmedabad, Indore, and Bhubaneswar.
Also Read: Managed office space provider Smartworks aims to hit 25 m sq ft across 14 cities in 4-5 years
Besides Ahmedabad, other cities, including Chandigarh, Jaipur, Coimbatore, Kochi and Indore, have flex stock between 0.3-0.5 mn. sq. ft. Lucknow, Thiruvananthapuram, Visakhapatnam and Bhubaneswar have flex office stock lower than 0.3 mn sq. ft.
According to the report, overall office absorption across the 10 cities stood at around 1.6 mn sq. ft. in Jan-Sep 2023 period, led by Ahmedabad, Jaipur, and Thiruvananthapuram. The total office stock in these 10 tier-II cities stood at around 68 mn. sq. ft. as of Sep 2023, with Ahmedabad, Kochi and Thiruvananthapuram, each boasting office stock higher than 7.5 mn. sq. ft.
The total office supply recorded in these 10 cities was around 3.4 mn. sq. ft. during Jan-Sep 2023. Top cities dominating supply addition in CY2023 include Ahmedabad, Kochi, and Indore.
Prominent flex operators such as Awfis and Incuspaze recorded presence in more than 5 cities, including Jaipur, Kochi, Lucknow, Thiruvananthapuram, Ahmedabad, Indore and Bhubaneswar. Other players who forayed into these cities include IWG, IndiQube and Smartworks, the report said.
Also Read: Office sector likely to witness net absorption of 37-39 mn sq ft in 2023
Tier-II cities are fast emerging as the next growth frontier for the office sector. With their growing talent pool, competitive real estate costs, and improving infrastructure, these cities are well-positioned to attract more businesses in the future. The sectoral drivers of office space demand in Tier-II cities include IT, technology, flexible space operators, e-commerce start-ups, technology GCCs, consulting and advisory GCCs, and Indian BFSI firms, the report said.
Traditionally, office spaces in smaller cities have been dominated by Grade B buildings, characterized by smaller floor plates, and limited amenities. However, recognizing the growing demand, Tier-II cities have been witnessing the development of modern office parks.
“India’s tier-I cities have been the main drivers of economic growth in the country being prime employment hubs. At the same time, India’s non-metros, referred to as tier-II and tier-III cities, have primarily been seen as residential or industrial centers, developing as hubs of trade and businesses over decades. The growth of micro, small and medium-sized enterprises (MSMEs) has been a key driver of economic activity in non-metro cities, providing a vital boost to local economies,” said Anshuman Magazine, Chairman and CEO, India, Southeast Asia, Middle East & Africa, CBRE.
