Real Estate: Flex Space Operators Chase Funds As Demand Rises – News18

Last Updated:December 16, 2024, 16:23 IST

Flexible office space operators have received $820 million worth of private equity funding since 2017 and taken on lease an estimated 52.9 million sqft, with a robust CAGR of 22 per cent.

As companies opt for flex spaces owing to cost optimisation and employee-centricity, flex space operators are tapping the market to raise funds in order to finance their expansion across multiple Indian cities.

According to Knight Frank India, flexible office space operators have received $820 million worth of private equity funding since 2017 and taken on lease an estimated 52.9 million sqft, with a robust compound annual growth rate (CAGR) of 22 per cent.

In 2024, the sector witnessed robust absorption rates driven by the expanding startup ecosystem and the increasing adoption of managed office models by established companies. According to a report by Vestian, flex spaces accounted for 18 per cent of the pan-India absorption of 18.61 million sqft during Q3 2024 in top seven cities.

Shesh Rao Paplikar, Founder & CEO, BHIVE workspaces said, “The market’s maturity is also paving the way for significant financial milestones, with IPO activity on the horizon. BHIVE is tapping into this momentum by planning a market raise.”

The rising demand for managed office spaces is reshaping workplace dynamics, and flex space providers are at the forefront of this transformation. By offering agile and customizable solutions, they are enabling businesses to address evolving needs while focusing on collaboration, innovation, and growth.

Parul Thakur, Senior Vice President and Business Head, Cowrks said, “Providers are also investing in modern infrastructure and hybrid-ready designs that support flexibility, helping organisations enhance operational efficiency and adapt seamlessly to market changes. This proactive approach highlights the critical role of flex space providers in meeting demand and empowering businesses to thrive in today’s competitive landscape.”

Earlier this year in May, Awfis space solution listed on the stock exchange at Rs 435, 14 per cent premium over its issue price of Rs 383 a piece on NSE. The revenue of Embassy Group-backed WeWork India grew 27% to Rs 1665 crore in FY24. The company is currently operational across 8 cities, with over 1 lakh desks. The company, according to media reports, also has plans for an IPO.

Coworking startup Innov8 plans to raise Rs 100 crore in a primary funding round for which it is in talks with potential investors. Incuspaze is in discussions to raise a $25 million pre-IPO round as it prepares for a public listing next year. In July, Incuspaze had raised $8 million in its maiden funding round. Urban Vault said they are looking to file an IPO by 2028 once they cross Rs 500 crore in revenue. The company expects to touch Rs 150 crore by FY25.

Nikhil Madan, co-founder of The Office Pass (TOP), said, “Owing to significant cost advantages, agility and changing workforce needs, there is a surge in demand from startups, SMEs and even large conglomerates for flexible office spaces.”

Another player Smartworks has received approval from the Securities and Exchange Board of India (Sebi) to raise funds through an initial public offering (IPO). BHIVE Workspaces also plans to raise about Rs 800 crore through an initial public offering (IPO) in the next financial year.

“This move underscores the confidence of investors in the sector’s potential, signalling a new era for commercial real estate. As market dynamics evolve, 2025 promises transformative growth for the flexible office ecosystem,” added BHIVE’s Paplikar.

The coming year is expected to see huge surge in demand as businesses will continue to prioritize cost; and flex space operators want to be fully capitalised.

“Flex space providers are very well capitalizing on this demand as the total flex office stock has already reached close to 70 mn sqft by the end of H1 2024 and shall touch triple digit in couple of years,” Madan added.

The demand for coworking and managed office spaces is set to surge in 2025 as businesses continue prioritizing agility, cost-efficiency, and employee-centric workplace solutions, Paplikar further said.