Flexible workspace rentals spike by up to 15% on demand uptick

New Delhi: Flexible workspace providers have raised their rentals by up to 15% due to higher demand from corporates and a spike in raw materials prices that led to escalation in fit-out costs, multiple operators told ET.

Most operators are reporting more than 90% occupancy, with no space available for immediate lease.

“With a surge in demand and limited amount of grade A office space available in metros, quality workspaces are commanding a higher premium,” said Nidhi Marwah, Group managing director, The Executive Centre. “We have mirrored the increase in rentals and fixed expenses ranging from 1-5% in our costs. However, other factors or deal terms drive final costs.”

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The last few years have been a catalyst for large corporations to re-evaluate their priorities regarding workspace needs; flexibility and employee well-being have become priorities, and these conveniences come at a price.

“The cost of everything has gone up in the past few months and in line with market prices, we have increased the rentals by up to 15%,” said Akshita Gupta, co-founder and CEO of ABL Workspaces, which has recently raised funds. from Canada based Ethik Inc in Series A funding round. “We believe the market will absorb the cost as corporations are focusing on flexibility and employee well-being.”

Several companies, including multinationals, have embraced the managed space concept after the Covid-19 pandemic.

“We haven’t seen a drastic rise in the pricing as of now; however, our costs have definitely gone up due to multiple factors such as inflation, operational costs, rise in cost of raw materials etc,” said Manas Mehrotra, Founder, 315 Work Avenue, which has raised rentals between 5% and 10%.

“There is a direct correlation between the pricing and the market conditions and we feel this will affect the pricing soon due to heightened demand of coworking space in the recent scenario,” he said.

Grade A Coworking and flex office operators are seeing occupancy levels between 80% and 95% across their centers, say experts.

“Clients are demanding more flexibility in the tenure of the agreements, and hence, lock-in terms have been reduced to anywhere between 6 and 12 months. This has led to a 10-15% increase in closing seat costs over the last quarter, ” said Shweta Sawhney, managing director, Delhi-NCR, Savills India.

There are a few other factors that determine the pricing of the workspace such as location, design, contract period, amenities, etc. Growth in office leasing indicates that the overall market fundamentals are strong and that demand for coworking will continue to remain robust because of the implementation of return-to-work policies, healthy hiring outlook of corporates and expansion plans by a lot of corporates.

However, some operators have not raised rentals.

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