Flex Office Spaces Occupiers’ Top Short-Term Real Estate Portfolio Strategy

BY Realty Plus

CBRE South Asia Pvt. Ltd, India’s latest survey findings highlight that the increasing use of flexible office space is emerging as the top short-term portfolio strategy, with 47% of respondents indicating increased use of flexible office space over the next 12 months. The survey further pointed out that 56% of the respondents intended to have more than 10% of the total office portfolio as flexible spaces by 2025, indicating that flexible spaces will continue to be a key component of occupiers’ portfolios.

In line with the drive for portfolio optimization and improved efficiencies, ~37% of respondents indicated increasing consolidation to fewer locations. This trend reflects the growing emphasis on streamlining operations and maximizing resource utilization. The survey found that there is growing interest in tier-II cities due to skilled talent pools and improving infrastructure and 13% of the respondents chose to relocate some functions to tier-II cities in Q1 2023 as compared to 8% in December 2021.

India’s attractiveness to global corporates would continue in the medium to long term. Occupiers’ outlook in Q1 2023 towards long-term portfolio expansion remained positive, as 75% of the respondents indicated that the size of their portfolios would increase over the next two years. This benchmark for expansion touched pre-COVID-19 levels, wherein 79% of the respondents in 2019 had indicated portfolio expansion and only about 6% had indicated contraction. The survey suggested that occupiers are now more bullish towards expansion as the percentage of respondents that expected a significant increase (>30%) in portfolio size grew from 12% in July 2022 to 28% in Q1 2023. Favourable demographics, a high-skilled and cost-effective talent pool, robust technology & start-up ecosystems, availability of high-quality office spaces, attractive rentals, and beneficial government policies are a few key long-term enablers of portfolio expansion by global corporates.

The survey pointed out that as Return to Office plans are ramped up in a hybrid environment, occupiers would strive to find the middle ground between supporting flexibility and ensuring predictable occupancies to utilize their space optimally. As a result, formulating hybrid working rules and policies that balance business goals with workforce needs would be at the top of occupiers’ agendas. To address the challenges faced by new hires in terms of onboarding, collaboration, cultural integration and visibility, occupiers are likely to assign them to a fixed physical office location. This approach was supported by 65% of the respondents. Remote hiring is expected to focus on a combination of work-from-home (WFH) and satellite offices, enabling new employees to periodically visit the office to connect with colleagues and become acquainted with the company's practices and culture. This hybrid approach was favoured by 35% of the respondents.

Enhancing the employee experience is a vital component of RTO planning, shaped by shared work experiences and relationships. Occupiers prioritize strategies such as integrating employee wellbeing into workplace and workforce strategies (74% respondents), granting greater flexibility through organizational policy changes (70% respondents), engaging all stakeholders to redefine office purposes and designs (60% respondents), and equipping people managers for managing hybrid teams through coaching and upskilling (56% respondents). 

The survey also highlights a change in occupiers' approach to bringing employees back to the office, which diverges from the trends seen in 2021 and 2022, despite the prevalence of hybrid working arrangements. In Q1 2023, the majority of respondents (96%) preferred working in the office for at least three days per week, which aligned with the findings of the July 2022 survey (91%). However, there has been a significant rise in the inclination towards fully office-based strategies, as 40% of respondents opted for this approach in Q1 2023, compared to just 18% in July 2022. Occupiers are expected to limit hybrid working to a portion of their workforce, as revealed by 73% of the respondents who indicated that less than half of their staff would be granted the option. Among the respondents, around 30% stated that hybrid working would be available to 25-50% of their employees.

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