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Flexible workspace sector to see consolidation in 2020

Flexible workspace sector to see consolidation in 2020

The demand for flexible workspace by enterprises remains firm: Colliers

Colliers, Colliers Research, Flexible workspaces, Growth, Demand, Investment

Flexible workspaces have grown rapidly in India since 2017, with the sector garnering 18% share in total leasing in 2019. In 2020, we believe that the flexible workspace market should start seeing consolidation, as larger flexible workspace operators with financial discipline acquire smaller companies. We already observe consolidation beginning in the market, with Indian hospitality chain OYO acquiring Gurgaon-based flexible workspace company, Innov8 in July 2019. The market should enter a phase of maturity with smaller players with lesser financial muscle even exiting the market.

We are also noting that key operators are in talks with institutional investors for funding, which could result in closure of certain deals in early 2020. We note that in India, sentiment in the sector has not dampened after WeWork’s failure to launch its IPO, and investors are on the look out for corporate-governed well-run flexible workspace operators. We urge operators to maintain a tight ship on operations, and cash flow management, as institutional investors become more stringent with due diligence process. The demand for flexible workspace by enterprises remains firm, and hence, we recommend developers to include a flexible workspace element in building design to cater to this growing need. Landlords should probably reserve certain floors for flexible workspaces, for managing it themselves or through partnerships.

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