Co-Working Space Share in Office Real Estate at 20% in H1 2022 from 6% in 2021

• Of net office absorption of 20.8 Mn sq. ft. in H1 2022 across top 7 cities, coworking comprised a 20% share; in H1 2021, its share was 6% of 9.33 Mn sq. ft.
• IT/ITeS office spaces share declined from 49% in H1 2021 to 36% in H2 2022
  Bengaluru & Hyderabad account for 50% of net office absorption in H1 2022
• Avg. monthly office rentals in H1 2022 up 5% in NCR & Hyderabad, up 4% each in Bengaluru & Pune
• H1 2022 saw robust new office supply aggregating to 31.8 Mn sq. ft., Bengaluru, Hyderabad & Pune dominated with a total 74% share
• With high new completions, avg. vacancy levels across top 7 cities rose by 2%

Demand for flexible office spaces has hit new high notes post the pandemic, with major companies and businesses including start-ups now opting for co-working. Latest ANAROCK data reveals that out of a net absorption of approx. 20.8 Mn sq. ft. across the top 7 cities in H1 2022, the share of co-working spaces stood at 20%. Back in H1 2021, its share was just 6% of net office absorption of approx. 9.33 Mn sq. ft.

In contrast, the share of IT/ITeS sector – India's leading office demand driver - declined from 49% in H1 2021 to 36% in H2 2022. However, this decline is largely because many IT companies are now also preferring flexible spaces to regular office spaces.

In terms of net absorption across the top 7 cities in H1 2022, Bengaluru and Hyderabad remained on top, comprising 50% of total demand share.

• Bengaluru, Hyderabad and Chennai - the top Southern cities - together witnessed net office absorption of approx. 12.2 Mn sq. ft. Of this, 18% or approx. 2.23 Mn sq. ft. was by coworking players.
• Western markets of MMR and Pune saw net absorption of nearly 5.45 Mn sq. ft. Of this, 27% or approx. 1.5 Mn sq. ft. was by coworking players.
• In NCR it stood at approx. 2.75 n sq. ft. Of this, 15% or approx. 0.41 Mn sq. ft. was by coworking players.
• In Kolkata, merely 0.4 Mn sq. ft. office space was absorbed. Of this, 14% or approx. 0.06 Mn sq. ft. was by coworking players. 

Anuj Puri, Chairman ANAROCK Group, says, "Coworking has received a major boost after Covid-19 disrupted the previous status quo. A major factor driving demand is that these spaces are not concentrated in just the city centres or major employment hubs; they're spread across different areas, including the housing-intense suburbs. Coworking spaces are now also operating out of malls and hotels across cities. Many large office parks are also housing coworking spaces. This helps companies to remain closer to their employees and offer them flexibility.”

Another advantage is that with flexible office spaces, companies can plug-and-play at the same cost rather than wrestling with office layouts and fit-outs. The lock-in period for taking up a regular office space is anywhere between 3-4 years. All these factors have also helped boost the demand for co-working spaces.

Cities	Net Absorption across cities in H1 2022 (in Mn sq. ft.)	% Share of Coworking in each City
NCR	2.75	15%
MMR	2.9	11%
Bangalore	6.1	23%
Pune	2.55	45%
Hyderabad	4.25	13%
Chennai	1.85	15%
Kolkata	0.4	14%
Total	20.8	20%

Source: ANAROCK Research

Office Rentals

Backed by rising office space demand, average monthly office rentals are also seen to be rising across the top cities:

• NCR and Hyderabad each saw a 5% rise in avg. monthly office rentals in H1 2022 compared to same period in 2021. Currently, the avg. monthly office rents in NCR are at INR 80 per sq. ft. while in Hyderabad it is INR 60 per sq. ft
• Bengaluru and Pune each saw a 4% yearly rise. The avg. monthly rentals in these IT hubs by the end of H1 2022 stood at INR 81 per sq. ft and INR 72 per sq. ft., respectively
• MMR, Chennai and Kolkata witnessed a 2% rise each in avg. monthly rentals in this period. In MMR, the avg. office rentals are the highest among the top 7 cities at INR 128 per sq. ft.; in Chennai they are INR 61 per sq. ft., and Kolkata has the lowest at INR 53 per sq. ft.

Office Rental (INR/Sqft/Month)
City	H1 2022	H1 2021
Bangalore	81	78
MMR	128	125
NCR	80	76
Chennai	61	60
Hyderabad	60	57
Pune	72	69
Kolkata	53	52

Source: ANAROCK Research

Supply

Meanwhile, the top 7 cities also witnessed robust new office supply in H1 2022, aggregating to 31.8 Mn sq. ft. Bengaluru, Hyderabad and Pune dominated with a total 74% share. Given the high new completions, average vacancy levels across top 7 cities rose by 2% to stand at 15.95% in H1 2022.

Co-Working Space Operators form Indian Workspace Association amid COVID-19 Crisis

Faced with liquidity crisis and loss of business due to the nationwide lockdown, the country's top co-working space operators have come together to form an association to chalk out strategies to deal with immediate cash-flow challenges and future roadmap.

The industry body named Indian Workspace Association (IWA) will represent the problems faced by the industry to the government as well as other stakeholders.

The co-working segment has been growing at a rapid pace over the past few years. The operators take space on lease from realty firms or landlords and then sub-lease to their clients which are startups, freelancers and corporates.

However, following the lockdown, these players are facing a huge liquidity crisis as many of their clients have shown reluctance in paying rents and some of them even cancelling agreements.

"Co-working and flexible workspace providers across the country have come together to form the Indian Workspace Association, that will be the de-facto voice of the workspace industry in India," the industry body said in a statement.

Although the association has been formed to represent and protect the wider interests of the industry as a whole, the IWA's immediate goal is to define protocols and practices for the industry to address the ongoing COVID-19 crisis.

The association would plan strategies for the way forward in a post-coronavirus world, it said.

IWA will represent majority of companies in the co-working and flexible workspace segment. It currently comprises more than 40 players - at both national and state levels.

The association is led by a core team of six members who have been nominated by the larger group to advocate the industry's concerns and put forth demands to the key stakeholders.

Karan Virwani, CEO, WeWork India; Akshit Mehta, Founder, Vorqspace; Pranay Gupta, Co-founder, 91 Springboard; Shesh Rao Paplikar, CEO, BHIVE Workpsace; Srishti Dhir, founder, Hub and Oak; Vikas Lakhani, Co-founder, InstaOffice and Yatin K Thakur, Founder, CoworkIn are the six members.

"Like most industries, the co-working industry has also been considerably impacted by the COVID 19 pandemic. Thus, we felt the need to create an association to synergise our efforts to help us present our unified position in front of our partners, industry stakeholders, as well as the government," said Pranay Gupta.

In the current environment, he said the IWA's top priority is to seek government support, rent waiver from landlords and discounts from service providers.

"We are liaising with the relevant ministries and authorities to get support and relief for the industry, which could eventually be passed on to our clients," Gupta said. PTI MJH