Bengaluru: Startups are expected to lease about 29 million sq feet of office space between 2022 and 2024, a 1.3-fold increase from the preceding two years, with demand largely led by fintech and logistics firms, which gained momentum post pandemic due to rising digital adoption and e-commerce boom.
Availability of a deep talent pool, favourable government policies and funding are steering growth of startups, property advisory Colliers and CRE Matrix said in a report titled ‘Startups Scale Up’.
Besides startups in the fintech and logistics space, demand among other sectors such as edtech, healthtech, and proptech is also expected to gain momentum.
“…Startups are the fastest growing occupier group among other occupier groups, and currently occupy 10% of the office space. This has created numerous opportunities for office space providers to rethink and reposition their workplace offerings to attract diverse set of occupiers. As startups pick up pace, landlords need to consider the business life cycle and work preferences of the startups to capture the real estate demand from startups to drive more value," said Ramesh Nair, CEO, India and MD, Market Development, Asia, Colliers.
Bengaluru remains the top startup hub with a 34% leasing share during 2019-21, with Koramangala, HSR and Indiranagar being the preferred locations for startups. A well-developed ecosystem, deep technology talent, and a culture of entrepreneurship are major factors attracting startups in the city.
Delhi-NCR, amongst the fastest-growing market in terms of leasing by startups, witnessed a three-fold increase in leasing by startups during 2021 on a year-on-year basis. The region benefits from being a catchment for education institutions and strong infrastructure. Mumbai has seen certain pockets of startup activity over the years. However, relatively higher rentals, and high cost of living are often seen as deterrents by early-stage companies.
“About 30 million sq ft office space in India is occupied by co-working or flex players. We believe a large share of this is occupied by start-ups. Therefore, anecdotally, start-ups currently occupy more than 49.7 mn sq ft. Our internal forecasts peg the start-ups occupancy to be about 78 million sq ft of office space plus 20-22 million sq ft in flex spaces by 2024, totaling to about 100 million sq ft by 2024 said," said Abhishek Kiran Gupta, CEO and co-founder, CRE Matrix.
While the metros remain the core hubs for startups, non-metros are seeing growth in startup leasing as well as flexi space take-up due to low cost of living, reduced capital expenditure and the ‘work from anywhere’ trend. Emerging hubs such as Jaipur, Ahmedabad, Indore, Coimbatore are likely to witness rise in flex space and startup occupancy as entrepreneurs are increasingly leveraging these locations to launch operations, the report said.
Office space providers need to adapt to cater to the needs of startups and their workplace preferences. As startups focus on creating collaborative culture, demand for well designed, fully managed spaces will increase. Flexible lease terms, minimal lock-ins and security deposits will also be an important parameter for startups while leasing space. This will create ample opportunities for flex space providers in metro and non-metro cities. Affordable locations close to city centres with expansion options are likely to be preferred by startups.
“The government’s push towards digitization and ease of doing business has provided a big boost to the startup ecosystem. The sector has also piqued the interest of investors that has helped the segment scale up creating numerous opportunities in office space. In the years to come, we will see a lot of changes in workplace designs with more focus on space design, amenities, technologies and customization," said Vimal Nadar, senior director and head of research, Colliers India.
The last three years have seen significant activity in office leasing by startups. Continuing this momentum, startups are likely to occupy 78 million sq feet of office space by 2024, accounting for 13% share from a mere 2% share in 2010. As of 2021, while global companies continue to dominate Indian office space occupying more than 60%, growth of startups has been highest, currently occupying a sizeable share of 10%.
