Flexible workspace providers hiking rentals by up to 15%

August 3, 2022
Flexible workspace providers hiking rentals by up to 15%

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.”

The last few years have been a catalyst for large corporations to re-evaluate their priorities about workspace needs; flexibility and employee wellbeing 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 the 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 corporates are focusing on flexibility and employee wellbeing,”

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, 315Work 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 centres, 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, MD, 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 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.

“Given the rise in demand, we have increased our footprint from 2.5 mn sq ft pre-pandemic to 6.5 mn sq ft across 14 cities and 133 centres. In line with the same, hiking prices is not a solution we believe in,” said Sumit Lakhani, Deputy CEO, Awfis.

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