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NEW DELHI: India’s commercial real estate market will see strong demand to push adoption of flexible workspaces, leading the sector to grow up to about 126 million sq ft at a 15% CAGR, addressing a USD 9 billion market by 2028, according to a report by Avendus Capital, an investment bank for private equity advisory.Sectors like IT & ITeS, BFSI, consulting, e-commerce, manufacturing, and new-age startups, along with the continuous influx of global captive centers (GCCs) are driving demand.Taking up space from a flex workspace operator can lead to ~15%-20% cost savings for the occupier, as compared to traditional leasing.Prateek Jhawar, managing director and head, Infrastructure and Real Assets Investment Banking of the company said, “The Indian office market has remained largely immune to global macro & sectoral headwinds. As more enterprises explore the remote workplace policy, we are seeing a broad shift towards flexible and modern office solutions. With demand being robust, the biggest challenge for flex workspace operators could turn out to be locking-in quality real estate supply in the central business districts of the top 7 cities at favourable rents. We expect at least 4 mature players to list in the next 2-3 years.”Average per desk cost in prominent micro-markets of Tier I metro cities like Mumbai, Bengaluru and Delhi NCR are over 50% higher than the prominent micro-markets of other cities.Currently, flex workspace operators are enjoying 30-35% stable-state, center-level IRRs in both co-working and managed offices. As the industry matures, the returns profile of the industry is expected to gradually stabilize more towards 20-25% IRR levels, which would still be much higher than what some other real asset classes provide.

Published On Mar 26, 2024 at 09:27 AM IST

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