Major flex operators flock to tier-II cities, Ahmedabad dominates: CBRE

Tier-II office hub: Tier-II cities in India are emerging as the hotspots for flexible office spaces, with nearly 26 major operators expanding their footprint across ten key cities, according to a report by CBRE.

The report sheds light on the increasing presence of flexible workspace operators in cities including Chandigarh, Jaipur, Lucknow, Coimbatore, Kochi, Thiruvananthapuram, Vishakhapatnam, Ahmedabad, Indore, and Bhubaneshwar. Ahmedabad leads the pack with over 0.5 million sq ft of flexible office space as of September 2023.

Flex beyond metros

Other cities such as Chandigarh, Jaipur, Coimbatore, Kochi, and Indore fall within the 0.3 to 0.5 million sq ft range. Lucknow, Thiruvananthapuram, Visakhapatnam, and Bhubaneswar have flex office stock below 0.3 million sq ft  This shift is driven by major players in the flex office sector, including Awfis and Incuspaze, which have established a presence in more than five cities, encompassing Jaipur, Kochi, Lucknow, Thiruvananthapuram, Ahmedabad, Indore, and Bhubaneswar. Additionally, giants like IWG, IndiQube, and Smartworks are actively venturing into these growing markets, signalling a broader recognition of the potential in tier-II cities for flexible office solutions.

Notably, office absorption across the ten cities reached approximately 1.6 million sq ft in the Jan-Sep ’23 period, with Ahmedabad, Jaipur, and Thiruvananthapuram leading the way. The total office stock in these cities stands at around 68 million sq ft as of September 2023, with Ahmedabad, Kochi, and Thiruvananthapuram boasting office stock higher than 7.5 million sq ft. During Jan-Sep ’23, the total office supply in these cities recorded 3.4 million sq ft, with Ahmedabad, Kochi, and Indore dominating supply additions in CY2023.

Driving forces and future outlook

Tier-II cities are positioned as the next growth frontier for the office sector, driven by a growing talent pool, competitive real estate costs, and improving infrastructure. Sectors such as IT, technology, flexible space operators, e-commerce start-ups, technology Global Capability Centers (GCCs), consulting, and Indian BFSI firms are identified as the key drivers of office space demand in these cities.

Anshuman Magazine, Chairperson & CEO, CBRE, highlighted, “India Inc. and numerous multinational companies are increasingly setting up offices in tier-II cities, capitalising on cost-effective real estate and the availability of talented professionals.” He expects information technology (IT) and technology companies to lead the shift towards smaller cities, with a surge in the number of companies establishing their Global Capability Centers (GCCs) in select tier-II cities.

City spotlight: Top 5 office markets in tier-II cities

The top five office markets are witnessing significant growth and activity, according to data from January to September 2023. In Chandigarh, the office space supply and absorption surpassed 120,000 sq ft, with a substantial stock ranging from 6 to 7.5 million sq ft. Notable occupiers in the city include IBM, Teleperformance, Concentrix, TaskUs, and Alorica, along with emerging startups such as Evage Motors, Ayu Health, LetsShave, and Cloud Scale Inc. 

Coimbatore, the second-largest city in Tamil Nadu, recorded office space absorption exceeding 120,000 sq ft., with a supply ranging from 50,000 to 80,000 sq ft. The stock in this growing market stands at 6 to 7.5 million sq ft, housing key players like CTS, Bosch, Amazon, Schlumberger, Infosys, HCL, and thriving startups including Ticket 9, Kovai.co, and BNC Motors.

Kochi, the port city and commercial capital of Kerala, witnessed both absorption and supply above 120,000 sq ft, contributing to a substantial stock surpassing 7.5 million sq ft. Key micro-markets in Kochi include MG Road, Kakkanad, and Seaport-Airport Road, hosting major occupiers like Wipro, CTS, TCS, Sutherland, EY, and startups such as Entri.app, Growcoms, and EduBrisk. 

Thiruvananthapuram, the capital city of Kerala, reported absorption and supply exceeding 120,000 sq ft, with a significant stock exceeding 7.5 million sq ft. Key micro-markets include Kazhakoottam, MG Road, Pattom, and Thampanoor, with major occupiers like UST, TCS, Allianz, Infosys, SunTec, and startups including Genrobotics, Twylabs, and Inzpira. 

Finally, in Ahmedabad, office space absorption and supply surpassed 120,000 sq ft, with a stock exceeding 7.5 million sq ft. Key micro-markets like Ashram Road, SG Highway, Prahlad Nagar, and GIFT City are home to occupiers such as the Adani group, Vodafone, and startups like Medkart Pharmacy, Petpooja, Renée Cosmetics, and MatterEnergy.