India Major Report - CBRE India Flexible Space Tenant Survey 2018-19 - Dec 2018 - G386

CBRE RESEARCH
CBRE INDIA ‘FLEXIBLE SPACE’

TENANT SURVEY – 2018/19
01/
FLEXIBLE SPACE EVOLUTION IN INDIA 04
02/
FLEXIBLE SPACE TENANT SURVEY 10
03/
DO THESE SPACE OPERATORS MIRROR
13
CORPORATE OFFICE PATTERNS?
04/
CORPORATE REALITIES – CHALLENGES OF
24
WORKING IN FLEXIBLE SPACES
05/
FLEXIBLE SPACES IN INDIA: MAPPING
OCCUPIER SENTIMENTS 27
06/
TOP 10 TRENDS TO LOOK OUT FOR BY 2020
30
INTRODUCTION
With looming business and economic uncertainty, Companies continue to implement workplace ECONOMIC DRIVERS
corporates are constantly evolving workplace strategies within their corporate office by providing The growing dominance of knowledge-intensive
strategies by stress testing what CBRE Research various types of spaces. However, several of them industries has led to a spurt in start-up companies
refers to as “Core + Flexi” space combinations.¹ have also tilted towards using third-party flexible in India. Given the pressing need for hiring tech-
The framework for these solutions has evolved spaces recently. In fact, flexible spaces originated equipped talent, the concept of ‘gig workers’ is
beyond the usual cost and agility requirements: as a shared service for start-ups, but began to be now being widely adopted in the country. This has
corporates are now equally stressing on talent utilised by larger/established corporates to improve concocted the right mix of new recruits, gig
attraction / retention by providing amenities or the agility of their portfolios amid a volatile workers and experienced professionals in an era
inculcating latest technologies. business environment. of ‘sharing economy’. As a result, start-ups prefer
flexible spaces as they require lower financial
This has resulted in flexible office space operators outlay and offer agile space formats, leasing
FIGURE 1: THE PILLARS OF WORKPLACE terms, etc.
growing rapidly in India. The growth could be
STRATEGIES attributed to three fundamental shifts – in (i)
technology and (ii) economy, which together have BEHAVIOURAL CHANGES
changed (iii) tenant behaviour².
Given the structural tech and economic shifts, it
has been observed that corporates have been
TECH EVOLUTION ‘following’ start-up policies. These changes are
CBRE India Research undertook a survey of leading not just limited to securing the best talent, but also
corporates in 2017, to gauge their views on the include their growing adoption of flexible spaces
impact of technology on business operations. The to reduce cost and add agility to their real estate
survey revealed that tech has a significant role to portfolio.
play in defining business models, shaping real
estate strategies and attracting / retaining talent.
For instance, 90% of the respondents said they
used tech to enable employee mobility. This
practice of ‘free-addressing’ has encouraged
corporates to opt for flexible spaces in order to
attract / retain talent.
Source: CBRE Research, Q3 2018
1. CBRE’s Exploiting the Agile Revolution: Prospects for Landlords

and Investors’, 2018
2. CBRE’s The Flexible Revolution, 2017
© 2018 CBRE, INC. INDIA ‘FLEXIBLE SPACE’ TENANT SURVEY - 2018 | CBRE RESEARCH
3
FLEXIBLE SPACE
EVOLUTION IN
INDIA
GROWTH OF FLEXIBLE SPACES IN ASIA PACIFIC (APAC)
Flexible spaces have grown rapidly in recent years, reaching a total footprint of under 40 million sq. ft. across APAC by H1 2018. This coverage was mapped by
CBRE across 16 major cities in the region3 (including the top three cities of India4).
With the recent wave of rapid expansion, flexible spaces account for about 1.7% of the total office stock in APAC currently5. Shanghai and Delhi-NCR were the only
two markets in the region where flexible spaces account for more than 3% of the overall office stock.
15 MN SQ.FT.
FLEXIBLE SPACE
STOCK IN INDIA
3. CBRE’s Exploiting the Agile Revolution: Prospects for Landlords and

Investors’, 2018
4. Delhi-NCR (Delhi, Gurgaon, Noida), Mumbai and Bangalore
5. APAC data updated till H1 2018 and India data is updated till Q3 2018
5
FIGURE 2: TOTAL SIZE OF FLEXIBLE SPACE AND % OF OVERALL MARKET IN APAC
Note – APAC data updated till H1 2018 and India data is updated till Q3 2018
6
There is no doubt that India is now one of the biggest FIGURE 4: GROWTH OF FLEXIBLE SPACE STOCK IN INDIA
flexible space markets in APAC: the overall stock of flexible
space in the country (including all seven Indian cities)
increased by about 50%, from almost 10 million sq. ft. in
2017 to about 15 million sq. ft. by Q3 2018. Bangalore
and Delhi-NCR were the largest markets for flexible spaces 16.0
in India, with a combined share of almost 55%. Grew by more than 50%
14.0
during 2016-17
FIGURE 3: CITY-WISE SPLIT OF FLEXIBLE 12.0
SPACES IN INDIA, BY AREA
In million sq. ft.

10.0
3%
7% 8.0
5% 25%
6.0
8%
4.0
2.0
22% 0
30% 2016 2017 2018 YTD
Delhi-NCR Bangalore Mumbai Hyderabad

Chennai Pune Kolkata
Note – The above data covers the top seven cities in India - Delhi-NCR, Bangalore, Mumbai, Chennai, Hyderabad,
Source: CBRE Research, Q3 2018 Pune and Kolkata.
7
The development story of the flexible space segment in the FIGURE 5: SHARE OF DOMESTIC OPERATORS IN INDIA AND APAC, BY AREA
country is similar to that of APAC. In both regions, the
growth can be attributed to the expansion of domestic
60% 68%
operators, which currently account for about 60% of the Share of Share of
total flexible stock. domestic players domestic players
in APAC6 in India
A closer look at the share of domestic players in flexible
spaces across cities underlines the above trend – with the
exception of Mumbai, where a prominent global player has Source: CBRE’s Exploiting the Agile Revolution: Prospectus for Landlords and Investors’, 2018; CBRE Research, Q3 2018
recently opened several large-sized centers across the city.
DOMESTIC FIGURE 6: SHARE OF DOMESTIC VS GLOBAL OPERATORS IN INDIA, BY AREA
OPERATORS 100%
CURRENTLY
80%
ACCOUNT FOR
68% % Share
60%
40%
20%
OF INDIA’S 0%
FLEXIBLE SPACE Delhi - NCR Bangalore Mumbai Hyderabad Chennai Pune Kolkata
STOCK Domestic Global

6. APAC data updated till H1 2018 and India data is updated till Q3 2018
8
LEASING BY FLEXIBLE SPACE OPERATORS
Space take-up by flexible space operators during 2016 FIGURE 7: CITY-WISE LEASING BY FLEXIBLE WORKSPACE OPERATORS IN INDIA
was estimated to be about 0.6 million sq. ft. across cities.
However, this more than quadrupled to about 3.5 million
sq. ft. in 2017. More than 80% of the leasing by flexible
space operators was concentrated in the top three cities of 2018 has emerged as the year of flexible space: leasing
Delhi-NCR, Bangalore and Mumbai. The share of flexible 6.0
expected to touch 5.4 mn sq. ft.
spaces as part of total office absorption also doubled from
5% in H1 2017 to about 10% in H1 2018. Overall space
take-up by flexible space operators is expected to touch 5.0
5.4 mn sq. ft. by the end of 2018.
4.0
80%
In million sq. ft.
3.0
LEASING ACTIVITY 2.0
WITNESSED IN
1.0
DELHI-NCR,
BANGALORE
0.0
AND MUMBAI 2015 2016 2017 Till Q3 2018 2018 E
Delhi - NCR Bangalore Mumbai Hyderabad

Chennai Pune Kolkata All Cities
9
FLEXIBLE SPACE
TENANT SURVEY
RESPONDENT PROFILE
In August 2018, CBRE India’s Research and A&T Occupier FIGURE 8: RESPONDENT PROFILE: TYPE OF FLEXIBLE SPACE
Group conducted interviews with leading flexible space
tenants across the country to get their views on the overall
experience of operating from flexible spaces.
41% 32% 27%
Business Co-working Hybrid
The survey covered both global and domestic tenants centers spaces spaces
operating out of various flexible space formats such as co-
working7, business centers8 and hybrid spaces9.
A majority of our respondents were established corporates

having flexible spaces as a part of their overall portfolio. FIGURE 9: RESPONDENT PROFILE: COMPANY TYPE
Our coverage was wide enough, including tenants whose

share of flexible spaces in their overall portfolio ranged 76% 24%
from less than 5% to more than 50%. Established Start-ups
corporates
FIGURE 10: RESPONDENT PROFILE: SHARE OF FLEXIBLE SPACES AS PART

OF TOTAL OFFICE PORTFOLIOS
50%
40%
% Share
30%
20%
7. Provide an open environment for multiple occupiers – along with enabling support
10%
ecosystems for operations. Space design emphasis is on casual ‘look and feel’.
0%
8. Provide a professional, formal environment with the office format similar to
conventional office spaces. 0-5% 5 – 20% 20 – 50% More than 50%
9. A convergence of various flexible space formats, with interchangeable offerings
which can cater to varied occupiers. Source: CBRE Research, Q3 2018
11
Our respondents belonged to a wide spectrum of FIGURE 11: RESPONDENT PROFILE: SECTORAL SPLIT
industries; ranging from technology, banking,
financial services, engineering, manufacturing to
media and e-commerce.10
23%
31%
4%
12%
15%
15%
Tech Media and e-commerce Banking, Financial Service Engineering &

Insurance Manufacturing
Research & Analytics Others
10. Industry sector analysis refers only to co-working Source: CBRE Research, Q3 2018
and hybrid tenants.
12
DO FLEXIBLE SPACE
OPERATORS
MIRROR
CORPORATE
OFFICE PATTERNS?
AGILITY
Our survey highlights the growing focus of flexible space FIGURE 12 : AGILITY IN RE: GLOBAL OFFICE OCCUPIER SURVEY RESPONDENTS
operators on deploying workplace strategies to enhance VS. FLEXIBLE SPACE SURVEY RESPONDENTS
user experience and cater to varied occupier types. These
operators are now understanding the changing employee GLOBAL OFFICE OCCUPIER FLEXIBLE SPACE SURVEY
AGILITY IN RE
mindset – that places they work at should be just as SURVEY RESPONDENTS RESPONDENTS IN INDIA
important as the places they live in.
Majority of the respondents
preferred activity-based About 70% of respondents chose
In today’s world, C-suite priorities have expanded to Agility in workplace
workspace design, floorplates, flexible spaces due to the provision of
include de-risking economic and business uncertainty by design/offerings
furniture selection and desking ‘agility’ in space formats.
allowing for agility. Basis occupier feedback received in
options.
CBRE’s Global Office Occupier Survey 2017, volatility of
any kind can result in different headcount scenarios and More than half of our survey
hence fluctuating space needs. RE (Real Estate) strategies respondents rated ‘agile’ commercial
have now evolved to introduce agility in various aspects of Negotiate for shorter lease
terms as one of the key reasons for
the corporate workplace across the globe. Agility in leasing terms with added flexibility in
choosing flexible spaces. This was true
structures expansion and contraction
for start-ups, as they often face long-
options in later years.
This trend is visible in our survey as well – flexible space term operational risks; as well as for
tenants integrate agility while making the same RE established corporates.
decisions as corporate office occupiers globally.
FIGURE 13: TOP RE STRATEGIES OF FLEXIBLE SPACE TENANTS IN INDIA
0% 10% 20% 30% 40% 50% 60% 70% 80%
Obtain agility in space format
Obtain flexible commercial terms
Note - For the above analysis, respondents were asked to rate parameters between 1 (lowest) and 5 (highest). The graph
above depicts the parameters that were given the highest ranking by a majority of tenants.
14
FLEXIBILITY ≠ OPEN SPACES: MAJORITY WANT ‘PRIVACY’
Workplace strategies initially involved the introduction of FIGURE 14: EVOLUTION OF WORKPLACE STRATEGIES
‘we’ or collaborative spaces over ‘me’ or private spaces as
part of office formats. However, new patterns are now
CORPORATE SPACES FLEXIBLE SPACES
emerging: tenants are striving to achieve a more equitable
balance between ‘me’ and ‘we’ spaces. Findings from THEN NOW
CBRE’s APAC Office Occupier Survey in early 2018
indicated that almost half of the respondents plan to ‘WE’ OVER ‘ME’ ‘WE’ OVER ‘ME’
increase ‘focus’ space in their workplaces in the next two
years. NOW
‘WE’ = ‘ME’
However, our survey showed a divergence of this strategy
for flexible spaces – ‘the creative environment’ is a major
attraction. Also, there have been growing concerns about
privacy or disruption of work processes. This has resulted in
occupiers preferring ‘private seating’ in flexible spaces, FIGURE 15: TYPES OF SEATS PREFERRED WITHIN FLEXIBLE SPACES IN INDIA
where leading operators have been known to ‘tailor’
internal designs to reflect individual corporate brand in
those designated private spaces. Operators also allow 10%
tenants to use common facilities such as meeting rooms
and opt for hot desks, even when their private spaces are 7%
fully occupied. This was reflected in our survey as well -
more than 60% of flexible space tenants preferred ‘private Private office space
spaces’ over hot / flexible desks, fixed open seating or a
mix of all seating types. A mix of all of seating types
Hot/ Flexible desks
63%
Even from an operator perspective, viability of achieving 20%
Fixed open seating
‘economies of scale’ implied providing more of private
spaces to attract established corporates, which have larger
requirements than start-ups. This would allow for more
assured revenue streams and counter the risk associated
with relaying only on start-ups.
15
VARYING SECTORAL ATTITUDES
Our survey also indicated that respondents had varied FIGURE 16: FLEXIBLE SPACES: WHERE DO DIFFERENT SECTORS STAND?
responses towards working from flexible spaces,
depending on the sectors they belonged to. For instance,
BFSI corporates, under heavy regulations for data
privacy/security, are currently in the early stages of
incorporating agility in their office portfolios. BFSI CONSUMER GOODS TECH
Comparatively, corporates belonging to consumer goods
and technology are at a more advanced stage as they are EARLY STAGE ADVANCE STAGE
more open towards operating from flexible spaces.
Quality and availability Cost-effective flexible
Flexible Heavily driven by access
Building on that trend, our survey also indicated that more of meeting rooms and options that aid product
objectives to key skills
than 60% of tech, media and e- conference space, privacy innovation
commerce respondents gave access of flexible spaces to
all management levels; as opposed to only 20% of BFSI
respondents. Managing legacy space Need fully flexible offerings to Use greater variety of
Priority focus and proximity to clients support collaboration and flexible space types to
speed to market support growth
Source: CBRE’s The Flexible Revolution, 2017; CBRE Research, Q3 2018
FIGURE 17: WILLINGNESS TOWARDS SPACE ALLOCATION TO ALL MANAGEMENT

LEVELS IN FLEXIBLE SPACES IN INDIA: A SECTORAL VIEW
0% 10% 20% 30% 40% 50% 60% 70%
Tech, media & e-commerce
BFSI
16
COST MANAGEMENT
‘Core + Flexi’ space solutions are conducive for space FIGURE 18: REASONS FOR CHOOSING FLEXIBLE SPACES IN INDIA
efficiency, which is the key to cost management across the
globe. In fact, 45% of the respondents in CBRE’s Global
Office Occupier Survey in 2017 stated cost reduction as a 0% 20% 40% 60% 80%
reason for using flexible spaces.
Our survey respondents had a similar view: A huge

advantage for flexible spaces was low / negligible upfront Low/ negligible
costs in comparison with a traditional lease, a statement upfront costs
affirmed by 70% of our respondents.
In fact, despite additional charges for using services such

as meeting rooms, more than half of our respondents
reported a reduction in overall costs while operating from
flexible spaces. However, as per market feedback, this
Reduces overall
holds true for only short-term leases. For tenants that want
cost
a long-term solution and have a sizeable workforce,
traditional leases are still the financially viable option.
17
TALENT ATTRACTION / RETENTION: ENHANCING THE
WORKDAY EXPERIENCE
As per CBRE Research, India is now one of FIGURE 19: EMPLOYMENT MANAGEMENT LEVELS OPERATING FROM FLEXIBLE SPACES IN INDIA
the biggest flexible office space markets in
APAC – a clear indication of strong
occupier appetite for this segment. The
15%
appeal of a range of workplace options
and of the ability to work from different New joiners / millennials
locations, perhaps some closer to home, in Mid-management
a flexible space with amenities has never 46% 28%
been more important to established Senior management
corporates.11 Moreover, the worsening All of the above
traffic situation and increasing travel time
is having a huge impact on not just 11%
millennials, but all employees.12

Recognising that the ability to work from FIGURE 20: WHAT COMPROMISES ARE
multiple locations can help in retaining MILLENNIALS WILLING TO MAKE FOR A
and even attracting talent, almost half of SPECIAL FOCUS ON MILLENNIALS BETTER WORK ENVIRONMENT IN INDIA?
our respondents have allowed employees Millennials now form one-fourth of the working
across all management levels to operate population of India.13 Globally, they are expected 30
out of flexible spaces. to account for 75% of the workforce by 202514. It is 22% 21% 21%
no wonder that their preferences would have a 20
lasting impact on the workplace environment. In
fact, in India, millennials consider the overall 10% 09%
10
‘workplace experience’ as a determining factor for
accepting a place of employment; they were willing
to go the extra mile or even take a pay cut for a 0
11. CBRE’s The Flexible Revolution, 2017 better work environment.15
Would move to a less attractive working location
12. CBRE’s ‘Arrival of the Tech Age – Is India CRE ready to
embrace the change?’, Feb 2018. Would travel further
13. CBRE’s Asia Pacific Millennials Shaping Future of Real For most respondents of our survey, millennials
Would move to a similar but less well known company
Estate, October 2016 accounted for about one-fourth of employees
14. The Deloitte Millennial Survey, 2014 working from flexible spaces in India. Would give up some progression and promotion
15. CBRE’s ‘Live, Work, Play: Millennials, Myths and Would accept a modest pay cut
Realities’, 2016
Source: CBRE’s Asia Pacific Millennials Shaping Future of Real
Estate, October 2016; CBRE Research, Q3 2018
18
THE POWER OF PLACEMAKING
Placemaking involves designing workspaces that provide FIGURE 21: PREFERENCE OF AMENITIES AND VALUE-ADDED SERVICES IN
employees with the comfort of home as well as create an
FLEXIBLE SPACES IN INDIA
inviting atmosphere that fosters collaboration, creation and
productivity. CBRE Research believes that different formats
of flexible spaces are now converging together, with a
largely interchangeable set of products rather than distinct
constructs. A common theme is that of talent
retention/attraction which involves the provision for a 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
diverse range of amenities and value-add services. This is
Amenities
in line with ‘placemaking’, which is defined by CBRE as Fast Wi-Fi and tech infrastructure
Café
integrating design, amenities and communities to create a
Round the clock access
unique space where people want to be. Keeping in mind Parking
tenant needs in corporate offices, placemaking has thus Lounge area
been a key theme adopted by flexible space operators as Monitoring space usage
well. Operators have been offering diverse products with Health & wellness services
an aim to differentiate themselves by offering various
Value Added Services

Networking ev ents
amenities and services as part of their placemaking Coupons, discounts, convenience services etc.
initiatives in flexible spaces. This was reflected in our survey Shuttle service
as well - flexible space tenants listed the same placemaking Miscellaneous services such as taxi booking
tools for flexible spaces as they would have preferred in a Gym
corporate office set up. Sleeping pods
Brewery
Yoga room
ADDING AMENITIES… Play area
Permission to bring pets to office
According to our survey, both established corporates and
start-ups ranked access to fast Wi-Fi, F&B services, round-
the-clock access, parking facilities, lounge area and tech
infrastructure as some of the most preferred offerings of a
flexible space set-up.
19
AND VALUE ADD SERVICES… AND COLLABORATION It is to be noted that majority of flexible space
Our respondents also agreed on the increasing With flexible spaces incorporating the synergies of respondents which reported no change in
appeal of value-add services including health a sharing economy, almost 40% of start-ups gave productivity or collaboration were those which
and wellness services, networking events, high importance to networking events at these had allocated less than 10% of their portfolio to
shuttle, gym and sleeping pods in flexible facilities and 70% of start-ups even reported an flexible space. A typical scenario for an
spaces. increase in both internal and external employee established corporate would be commonly
collaboration. Keeping the privacy aspect in mind, applicable in this case – its operations spread
about 60% of established corporates also across a few sites where the lease on one of its
THEREBY IMPROVING PRODUCTIVITY… locations is about to expire. This would result in a
reported an increase in both internal and external
There is no doubt that health and wellness employee collaboration. short term need of ‘swing space’ filled in by
initiatives will play an important role in occupying flexible spaces which would not have a
placemaking. For instance, companies’ visible impact on productivity or collaboration.
offerings in terms of wellness are likely to
become a crucial aspect for recruiting and FIGURE 22: IMPACT ON EMPLOYEE PRODUCTIVITY AND COLLABORATION AFTER
retaining talent over the next 10 years.
According to CBRE Healthy Offices Research, a
USING FLEXIBLE SPACES IN INDIA
healthy office environment has a snowball IMPACT ON EMPLOYEE PRODUCTIVITY IMPACT ON EMPLOYEE COLLABORATION
effect: it not only improves productivity, but can
also inspire changes in personal lifestyles.16
Almost half of our respondents also reported 4%
an increase in employee productivity after using
flexible spaces.
31%
50% 46%
46%
23%
Internal External No Change

Increased No Change Declined Collaboration Collaboration
16. CBRE’s ‘The Snowball Effect of Healthy Offices’, 2017 Increased Increased
20
TECHNOLOGY
Advances in technology are allowing companies TECH AND BUSINESS OPERATIONS This is in line with the growing norm of outsourcing
worldwide to permit remote working and implement According to CBRE’s India Technology Survey in data storage to cloud computing as regular
multi-cloud computing strategies. This enables 2017, Indian businesses can now see the investments in new servers and technology can get
employees to access information and work increasing appeal for “data”, whether it comes to expensive, especially for established corporates.
efficiently from multiple locations, thereby fueling data storage (cloud computing) or data analysis Keeping in mind the limited access that start-ups
the growth of flexible spaces. Even when it comes to (Big Data). Cloud computing (85%) has emerged would have to outsource data storage on to a cloud,
implementing new technologies, flexible space as the second most preferred technology after the appeal of flexible spaces becomes clearer: About
respondents have similar needs – they prioritise automation (95%); amongst technologies that half of the respondents in our survey felt the need for
those which enhance business operations, have impacted occupiers’ business operations. data/cloud storage to be tech-tailored in flexible
streamline property management and help spaces.
monitor/ optimise space usage.
21
TECHNOLOGY
TECH AND PROPERTY MANAGEMENT

FIGURE 24: PROPERTY MANAGEMENT
With the quality of property management being a key factor in the ‘stay or leave’ decisions of ASPECTS PREFERRED TO BE TECH-
respondents, building management and business administration have emerged as critical aspects of
corporate real estate decision making. This was also reflected in CBRE’s Global Tenant Survey
TAILORED IN FLEXIBLE SPACES IN INDIA
conducted in early 2018, which ranked various aspects of value-added property management.
FIGURE 23: TOP VALUE-ADD ASPECTS OF PROPERTY MANAGEMENT ACROSS THE 60%
GLOBE
50%
Global Includes building fault corrections, building security, internal
Building
Rank climate and energy use control, cleaning services, elevator,
% Share
management 40%
#1 exterior, common areas, utility maintenance, etc.
30%
Global
Includes communication of major upgrade requirements, 20%
Rank Business
service charge administration, rent collection, health and
#2 administration
safety or building sustainability advice, etc.
10%

0%
Payment and lease Building
details management
The above is applicable to traditional office space occupiers looking at incorporating tech in
corporate office spaces. However, flexible space respondents have slightly different priorities. Note - For the above analysis, respondents were asked to rate
parameters between 1 (lowest) and 5 (highest). The graph above
Given that the agility of lease structures could be a deal breaker, more than half of flexible space depicts the parameters that were given the highest ranking by a
respondents in India identified tech-enhancement of business administration (particularly the majority of respondents.
aspect of payment and lease details) as their top preference. Digitization of building management Source: CBRE Research, Q3 2018
came a close second at about 50%.
22
TECHNOLOGY
FIGURE 25: IMPORTANCE OF PROPTECH AS RATED IN VARIOUS CBRE OCCUPIER SURVEYS

PROPTECH
Adoption of technology in real estate portfolio REGION TOP PROPTECH (AS RATED BY OFFICE RESPONDENTS)
management is a continuous process. To finetune
workplace strategies, one needs to monitor space Feedback from
usage and then optimise portfolios. Once data is
Top areas of tech focus for occupiers are expected to be office space
CBRE’s APAC
analyzed, patterns recognized and solutions management and navigation (apps to book desks/meeting rooms and
Office Occupier
implemented, sustained monitoring is required to wayfinding – 64%, and connected sensors – 43%).17
Survey 2018
further improve space utilisation. Technology can
aid in both optimizing and monitoring space Feedback from
portfolios. Optimize space usage through big data in asset/portfolio management
CBRE’s India
(95%) and wearables to monitor people flow (83%) emerged as the top
Technology
In today’s digitized era, the priority attached to prop tech which occupiers have or will implement.18
Survey 2017
PropTech is high across all geographies / regions.
This holds true for traditional as well as flexible
space occupiers. Respondents to our survey also
Meeting room allocation (almost half), space utilization (almost half) and
Feedback from
prioritised PropTech; as was the case in our Global CBRE’s workplace allocation (about 60%) emerged as the crucial aspects which
India
and APAC Office Occupier Surveys. need to be tech-enhanced in flexible spaces. In fact, as established
Flexible Space
corporates strive to optimise their portfolios, about half of the respondents
Tenant Survey
rated monitoring of space usage as critical.
FIGURE 26: PREFERENCE OF FACILITIES TO BE TECH ENABLED IN FLEXIBLE SPACES IN INDIA
Workspace allocation
Space utilisation
Meeting room allocation
0% 10% 20% 30% 40% 50% 60%

17. CBRE’s APAC Office Occupier Survey, 2018 Note - For the above analysis, respondents were asked to rate parameters between 1 (lowest) and 5 (highest). The graph above depicts the
18. CBRE’s ‘Arrival of the Tech Age – Is India CRE ready to embrace parameters that were given the highest ranking by a majority of respondents.
the change?’, Feb 2018 Source: CBRE Research, Q3 2018
23
CORPORATE
REALITIES –
CHALLENGES OF
WORKING IN
FLEXIBLE SPACES
CHALLENGES
It is apparent that flexible spaces are a popular RE solution FIGURE 27: CHALLENGES OF WORKING IN FLEXIBLE SPACES IN INDIA
for corporates. However, our survey outlines specific areas
which need attention. The downside to flexible spaces
highlighted by respondents include concerns about privacy, 0% 10% 20% 30% 40% 50% 60%
data security, disruptions to business operations and costs.
Data security
FLIPSIDE TO ROUND-THE-CLOCK ACCESS
With all its perks, the collaborative and inviting flexible
space environment is tailored to attract talent, but it may Client privacy
pose its own threats – open, round-the-clock access raises
questions over the quality of data security provided by
these spaces, with more than half of our respondents
Cost
rating it as the top most challenge. Issues regarding data
security would also cover tenant concerns about
oversharing of rack spaces, server rooms etc. as well as
third party management of servers. Comparing a safe, Disturbing environment
controlled office environment to this new format of
workspace led to more than 40% of flexible space
respondents raising issues about the lack of privacy. Brand individuality
Employee poaching
Note – For the above analysis, respondents were asked to rate parameters between 9 (lowest) and 5 (highest). The
graph above depicts the parameters that were given the highest ranking by a majority of respondent
25
QUESTIONING COST-EFFECTIVENESS OF FLEXIBLE In fact, more than 30% of our respondents said that ‘disturbing environment’ was an impediment
SPACES to expanding their footprint in a flexible space. Interestingly, a majority of those were global
respondents with less than 5% flexible space who were, in all likelihood, using this format as
On an average, only 60% of the membership fee (basic
‘swing space’. Additionally, interaction of employees from various companies also brings into
fee which a tenant pays for occupying a seat) in flexible
question which policies are applicable in case of any adverse consequences. Currently, as
spaces across APAC covers renting hot desks and private
corporates do not have any hard-defined policies outlining employee protection/behavior in
offices19; the remaining costs are proving to be heavy for
flexible spaces, they may be open to undefined liabilities. These concerns, along with the threat of
our respondents as well. About 40% of our flexible space
employee poaching may well create a cap on the share of portfolio that a company chooses to
respondents cited this membership fee (cost) as the
place in flexible spaces.
second biggest concern. This is a bigger challenge for
start-ups, which often have to pay a premium, as
compared with established corporates where flexible
arrangements can be cost effective20.
Occupiers need to develop and evaluate their portfolios to

ensure they have the best blend of ‘Core + Flexi’ space
and configure both to best fit the requirements of their
users. This will require continuous monitoring as the
workforce evolves while still ensuring a balance between
enterprise efficiency and cost effectiveness21.
DISRUPTIONS TO BUSINESS ACTIVITIES

Almost 30% spoke of fears of diluting brand individuality
when working from flexible spaces. This has been found
to be a larger concern for established corporates where
privacy concerns prohibit them from projecting their
brand and identity not only to employees, but also to the
market.22
19. Deskmag’s Global Coworking Survey 2018 – As6an results.

21. CBRE’s ‘Top Trends in Facilities Management’, 2018
26
FLEXIBLE SPACES IN
INDIA: MAPPING
OCCUPIER
SENTIMENTS
OCCUPIER SENTIMENTS
There is optimism around the future prospects of flexible FIGURE 28: GROWTH IN SHARE OF FLEXIBLE SPACE AS PART OF TOTAL
spaces in India. When asked about the quantum of OFFICE PORTFOLIOS OVER THE NEXT TWO YEARS IN INDIA
increase, about half of our respondents said they expect to
allocate more than 10% of their portfolios to flexible spaces
over the next two years. This trend was more strongly
expressed by global respondents, about 60% of whom
have plans to add agility to their office portfolios in India.
Next two years
28%
50% 43%
50%
Current
50%
8%
OF RESPONDENTS
TO INCREASE 23%
FLEXIBLE SPACE
USAGE OVER
0-5% 5-10% More than 10%
THE NEXT TWO
YEARS Source: CBRE Research, Q3 2018
28
It is also clear that the positive sentiments towards FIGURE 29: ESTABLISHED CORPORATES VS. START-UPS: TAKE ON FLEXIBLE SPACES IN
flexible spaces are being backed by demand from INDIA
established corporates, who are eager to avail the
benefits of flexible spaces. About half of PARAMETER ESTABLISHED CORPORATES START-UPS
established corporates stated that they would
Prioritize quality of space, cost Prioritize the ‘look and feel’,
allocate more than 10% of their office portfolios to along with cost and agility of the
agile spaces in the next two years. The availability and agility; attracted to top
operators. Give greater creative environment
of prime, ready-to-move-in space is becoming a
major challenge for corporate occupiers in most
Indian cities. Hence, it has been observed that
opting for flexible spaces in the short term (for 12-
1 PRIORITIES importance to monitoring of
space usage in order to gauge
the optimum share of flexible
Give greater importance to
networking events as it would
18 months) is fast becoming a trend. spaces as part of their total involve generating much-needed
portfolio business and contacts
In CBRE’s view, it then becomes imperative to take
a closer look at the opinion of established Reported improvement in Less reports of improvement in
corporates about flexible spaces vis-à-vis that of productivity after using flexible productivity as most start-ups have
start-ups: IMPROVEMENT spaces, mainly due to been operating only from flexible
2 IN EMPLOYEE
PRODUCITVITY
employees’ ability to access the
various amenities offered by
spaces and thus had no other
comparable benchmarks
flexible spaces as compared to
their corporate offices
Comparatively less enthusiastic Reported substantial improvement

IMPROVEMENT about improvements in in internal and external
3 IN EMPLOYEE
COLLOBORATION
employee collaboration due
to concerns about privacy and
collaboration between employees
mainly due to the probable
data security connect with similar firms
Most concerned about client Most concerned about cost
4
privacy, data security and
CONCERNS brand individuality
29
FLEXIBLE SPACES IN
INDIA: 10 TRENDS
TO LOOK OUT FOR
BY 2020
TRENDS TO LOOK OUT FOR BY 2020
There has been a structural shift in office #1 #2

space demand over the past few years, with INCREASING SHARE OF FLEXIBLE SPACE IN MORE ESTABLISHED CORPOPATES TO OPT
employee preferences increasingly OVERALL LEASING FOR FLEXIBLE SPACES
influencing CRE decisions. As employees are
keen on the percolation of flexibility to all The share of flexible spaces has already doubled The optimism of flexible space operators is being
aspects of work, it is evident that flexible from 5% in H1 2017 to 10% in H1 2018 – a clear fueled by the rising interest of established
spaces are here to stay. As they can be a indication of the aggressive expansion plans of corporates in this segment. We anticipate that this
win-win option for corporates, operators and operators. We anticipate that the leasing quantum trend would continue, given the willingness of
employees alike, CBRE anticipates the of this segment would rise from about 5.4 million operators to customise offerings and prioritise
following trends to prevail in this segment in sq. ft. in 2018 to about 7-9 million sq. ft. by 2020. member loyalties.
India by 2020:
#3 #4
NICHIFICATION OF PRODUCT OFFERINGS ‘FREE-ADDRESSING’ POLICIES TO BOOST
OPERATOR EXPANSION
It has been mentioned previously that various As employees embrace the option of working
formats of flexible spaces have now started to remotely from any location, operators are keen to
converge, with an interchangeable set of product attract corporate demand by expanding to multiple
offerings such as hybrid spaces. However, while the locations within the same city. More particularly,
line may blur between various flexible space types, operators are expected to change their strategy of
we anticipate operators to tailor offerings to remain staying only in core parts of a city to moving to
differentiated from close competitors. various peripheral locations. The convenience of
‘plug and play’ formats offered by these new-gen
#5 workspaces would thus enable companies to
FLEXIBLE SPACES UNLIKELY BE LIMITED TO follow the ‘hub and spoke’ model, with the
OFFICE BUILDINGS corporate office serving as the ‘hub’ and flexible
spaces spread across the city acting as ‘spokes’.
CBRE’s 2017 report on this segment had
highlighted that flexible operators would move to
retail spaces as well. This trend has come in
greater prominence – operators are now looking
at underperforming shopping centers as well as
mixed-use (office-cum-retail) developments. We
further anticipate that operators would also look
at semi-investment grade or refurbished options,
keeping in mind the location and cost of
© 2018 CBRE, INC. these properties. INDIA ‘FLEXIBLE SPACE’ TENANT SURVEY - 2018 | CBRE RESEARCH
31
#6 #7 #8
FLEXIBLE SPACE OPERATORS TO CLOSE EXPANSION FROM GATEWAY TO GETAWAY FLEXIBLE SPACES TO BE FURTHER TECH-
LARGE SIZED DEALS CITIES TAILORED
Flexible space operators have been leasing A majority of leasing in the country has so far Given that it was technology that gave birth to the
larger spaces over the years. Recent quarters occurred in the top three cities - Delhi-NCR, concept of ‘a liquid workforce’, flexible space
have seen prominent players taking up more Bangalore and Mumbai; with operators opening operators are anticipated to become more
than 100,000 sq. ft. in multiple locations up multiple centers within the same city. However, attuned to the latest tech which could benefit both
across the top cities. As a result, the average we anticipate that operators would now look corporates and employees. We expect corporates
deal size has tripled from 14,500 sq. ft. in towards cities such as Chennai, Hyderabad and to focus more on tech-related aspects of flexible
2015 to 44,500 sq. ft. in 2018 YTD23. We Pune over the next few quarters. spaces for optimising/monitoring space usage
further expect enhanced demand from along with improving productivity and
established corporates to translate into take-up collaboration. On the other hand, employees
of a larger number of seats as compared to would be more interested in digitising amenities
start-ups. Moreover, landlords are beginning to and value-add services.
see the advantages of including flexible space
in their tenant profile (it attracts other tenants,
reduces vacancies and can possibly improve #10
cashflow and valuation premiums). Keeping #9
both perspectives in mind, we anticipate an SMALL-SCALE MERGERS AND ACQUISITIONS INCREASED FUNDING FOR FLEXIBLE
increase in the format size leased by flexible SPACES
space operators in the coming quarters.
While India has remained aligned with most Given that the Indian flexible space market is
global patterns related to this sector over the past one of the biggest in APAC, we anticipate that
two years, we believe consolidation in this this segment will remain high on investor
segment is yet to come into play. Different radar. With prominent global and domestic
ownerships, company structures, offerings, operators establishing operations over a short
funding mechanisms and prices / scale are span of time, it is likely that large
currently preventing M&A activity among stakeholders would place their next bets on
operators, with a few small exceptions. We this segment in the country. New funding
anticipate that unless this segment witnesses an avenues would also boost confidence in
entire economic cycle, including a downturn, operator performance in the country,
consolidation is likely to occur at a comparatively improving their financial viability and
slower pace in the country. securing their future profitability.
23. Till Q3 2018
32
For more information about this regional major report, please contact:
RESEARCH BUSINESS LINE
Abhinav Joshi Sachi Goel Raaj Thilak Raveendran Ram Chandnani Rajat Gupta
Head of Research, India General Manager Asst. General Manager Managing Director, A&T, India Managing Director, A&T, India
Abhinav.joshi@cbre.co.in sachi.goel@cbre.co.in raajthilak.ravenndran@cbre.co.in ram.chandnani@cbre.co.in Rajat.Gupta@cbre.co.in
Abbishek Sharma Sidharth Dhawan

For more information regarding global research, please contact: Director, A&T, India Agile Real Estate Lead, Asia Pacific
abbishek.sharma@cbre.co.in sidharth.dhawan@cbre.com.hk
Richard Barkham, Ph.D., MRICS Henry Chin, Ph.D.
Global Chief Economist Head of Research, Asia Pacific
richard.barkham@cbre.com henry.chin@cbre.com.hk
Jos Tromp Spencer Levy

Head of research, EMEA Head of Research, Americas
jos.tromp@cbre.com spencer.levy@cbre.com
CBRE in October 2018 has launched Hana, a new service offering designed to help institutional property owners meet the rapidly growing demand for flexible office space
solutions. For more information, please see https://www.cbre.com/real-estate-services/directory/flexible-space-solutions
CBRE also offers ‘calc’- a product calc which helps occupiers evaluate options between flexible and traditional leases. For more information please see https://calc.cbre.com/
Follow CBRE
CBRE RESEARCH
This report was prepared by the CBRE Asia Pacific Research Team, which forms part of CBRE Research—a network of preeminent researchers who collaborate to provide real estate market research and econometric forecasting to real estate.
All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not
doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy, completeness and currency of the information of this publication. This report is presented for information
purposes only exclusively for CBRE clients and professionals, and is not to be used or considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments. All rights to the material are reserved and none of the material, nor its content,
nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without prior express written permission of CBRE. Any unauthorized publication or redistribution of CBRE research reports is prohibited. CBRE will not be liable for any loss, damage, cost
or expense incurred or arising by reason of any person using or relying on information in this publication.
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at reports www.cbre.com/research-and-reports
© 2018 CBRE, Inc.

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CBRE RESEARCH

CBRE INDIA ‘FLEXIBLE SPACE’

Source: CBRE Research, Q3 2018

1. CBRE’s Exploiting the Agile Revolution: Prospects for Landlords

3. CBRE’s Exploiting the Agile Revolution: Prospects for Landlords and

In million sq. ft.

Delhi-NCR Bangalore Mumbai Hyderabad

DOMESTIC FIGURE 6: SHARE OF DOMESTIC VS GLOBAL OPERATORS IN INDIA, BY AREA

STOCK Domestic Global

LEASING ACTIVITY 2.0

Delhi - NCR Bangalore Mumbai Hyderabad

Source: CBRE Research, Q3 2018

A majority of our respondents were established corporates

Our coverage was wide enough, including tenants whose

Source: CBRE Research, Q3 2018

FIGURE 10: RESPONDENT PROFILE: SHARE OF FLEXIBLE SPACES AS PART

Tech Media and e-commerce Banking, Financial Service Engineering &

0% 10% 20% 30% 40% 50% 60% 70% 80%

Obtain agility in space format

Obtain flexible commercial terms

Source: CBRE Research, Q3 2018

Source: CBRE’s The Flexible Revolution, 2017; CBRE Research, Q3 2018

FIGURE 17: WILLINGNESS TOWARDS SPACE ALLOCATION TO ALL MANAGEMENT

Tech, media & e-commerce

Our survey respondents had a similar view: A huge

In fact, despite additional charges for using services such

Source: CBRE Research, Q3 2018

Value Added Services

Internal External No Change

TECH AND PROPERTY MANAGEMENT

Source: CBRE Research, Q3 2018

FIGURE 25: IMPORTANCE OF PROPTECH AS RATED IN VARIOUS CBRE OCCUPIER SURVEYS

FIGURE 26: PREFERENCE OF FACILITIES TO BE TECH ENABLED IN FLEXIBLE SPACES IN INDIA

Meeting room allocation

0% 10% 20% 30% 40% 50% 60%

Occupiers need to develop and evaluate their portfolios to

DISRUPTIONS TO BUSINESS ACTIVITIES

19. Deskmag’s Global Coworking Survey 2018 – As6an results.

Comparatively less enthusiastic Reported substantial improvement

Most concerned about client Most concerned about cost

There has been a structural shift in office #1 #2

Abbishek Sharma Sidharth Dhawan

Jos Tromp Spencer Levy

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