Why are tier 2 cities emerging as key markets in India’s commercial real estate sector?

In this episode of the State of the Economy Podcast, Abhishek Law looks into the changing landscape of India’s office real estate market with Amit Ramani, Founder and CEO of Awfis, India’s largest flexible workspace provider.

Awfis has garnered attention by becoming the first coworking company in India to go public within just nine years of its inception, raising ₹6,599 crore during its IPO. The company is now focusing on major markets like Bangalore, Pune, and Tier 2 cities while targeting a 30% revenue growth in FY25.

Amit Ramani shares his perspective on the current state of India’s office market, emphasising the rapid growth of flexible workspaces. “Flexible workspaces now account for 65 million square feet out of India’s total 850 million square feet of office space. We expect this number to surpass 100 million in the next few years, with a 20% compound annual growth rate,” Ramani states, highlighting the swift evolution of this sector. He attributes the accelerated demand for coworking spaces to economic drivers such as the IT sector, global capability centers, and the growing presence of multinational corporations.

The discussion also covers how the coworking sector has evolved since the pandemic, with enterprises now at the forefront. “Before the pandemic, coworking was primarily driven by startups and SMEs, but now large enterprises are embracing flexible spaces. The need for flexibility, speed, and a multi-location presence has transformed how companies approach their office needs,” Ramani explains.

Awfis has adapted to these changes by offering solutions tailored to the new demands of enterprises, including bespoke managed office spaces.

Ramani also addresses the rising significance of Tier 2 cities such as Indore, Jaipur, and Bhubaneswar. “Cities like Indore, Jaipur, and Bhubaneswar are emerging as key markets. Employees view them as viable alternatives to metros, but the challenge is the lack of supply, which is driving rental prices higher than in some Tier 1 cities,” he observes, shedding light on both the opportunities and challenges in these expanding markets.

On the future of managed offices, Ramani reveals, “Managed offices now represent 25% of our business, a notable increase driven by enterprise clients seeking customised workspaces. It’s no longer just about shared space; it’s about creating tailored environments for large companies.”

Ramani also discusses the resilience of India’s office market amidst global trends. “While global markets like the U.S. face challenges due to the rise of remote work, India’s office market remains resilient. With rapid urbanisation and a population of over 1.44 billion, the demand for office space here is set to continue growing.”

Tune in to hear more!

(Host: Abhishek Law, Producers: Amitha Rajkumar, Siddharth Mathew Cherian.)

About the State of the Economy podcast

India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders.