India’s flexible or co-working office supply in the top six cities is set to grow at a compound annual growth rate (CAGR) of 21–22%, reaching 125 million square feet by March 2027, according to a report by ICRA, as published in The Financial Express.
This surge in supply will be driven by strong demand from enterprise clients, startups, and domestic corporations.
As of December 2024, the flexible office supply in Bengaluru, Chennai, Delhi-NCR, Hyderabad, the Mumbai Metropolitan Region (MMR), and Pune stands at approximately 80 million square feet. ICRA forecasts that this figure will grow by 17-19 million square feet annually between FY2025 and FY2027, leading to a total of 121-125 million square feet of flexible workspace by March 2027.
Leasing activity in the flexible workspace segment remained robust, with absorption reaching around 13 million square feet in FY2024, compared to the 14 million square feet of new supply. This healthy demand helped reduce the vacancy rate by 300 basis points, dropping from 20% in March 2023 to 17% by March 2024.
Despite a significant influx of new supply in the coming years, ICRA expects vacancy rates to remain stable. The vacancy rate is projected to stay in the range of 16.5% to 17% by March 2025, with further improvements expected to bring it down to 15.5% to 16.5% by March 2026 and 2027.
Anupama Reddy, Vice President and Co-Group Head of Corporate Ratings at ICRA, highlighted that the flexible office supply in the top six cities has more than doubled in recent years. It grew from 32 million square feet in March 2020 to over 67 million square feet by March 2024. By March 2027, it is expected to expand further, reaching between 121 million and 125 million square feet.
The rapid growth in demand for flexible office spaces is attributed to the increased need for flexibility, short-lease tenures, and lower upfront capital expenditure for tenants. ICRA projects that the share of flexible workspaces in the overall commercial office segment (excluding SEZs) will rise significantly, from 5.3% in FY2020 to 12.5-13.5% by FY2027.
The market remains dominated by a few key players, with the top five operators accounting for 40% of the total flexible office supply in FY2024. This segment is also poised for significant financial growth, with five major IPOs anticipated within the next 12-18 months, which are projected to raise over Rs. 7,000 crore.
The flexible office market has gained significant momentum post-pandemic, driven by the rise of hybrid work models and an increasing desire for diverse work environments. As of December 2024, India has over 450 flexible office operators spread across more than 2,000 unique locations.
Among India’s top six cities, Bengaluru leads the flexible office supply market, accounting for 32% of the total flexible workspace supply.