India's flexible workspace market may expand up to 18% due to GCCs: Crisil

India's flexible workspace market is projected to expand sharply over the next two fiscals, driven by rising demand from GCCs, corporates and start-ups, with credit profiles expected to remain stable

India’s flexible workspace segment is poised for sustained expansion, with total capacity expected to grow 16–18 per cent over the current and next financial years to reach 140–145 million square feet, according to a report by Crisil Ratings. 

The sector has already witnessed rapid growth, recording a compound annual growth rate (CAGR) of around 23 per cent over the past three fiscals through FY26. The continued expansion is driven by rising demand from global capability centres (GCCs), domestic corporates and start-ups seeking cost efficiency and operational flexibility.

What is driving demand for flexible workspaces in India?

The shift towards hybrid work models and the need for agile operations have significantly boosted demand for flexible office spaces. These workspaces offer lower upfront investment, flexible lease tenures and the ability to scale operations quickly across cities, making them increasingly attractive to businesses. 

 

“Flex operators are emerging as a key growth driver of net absorption in the commercial real estate (CRE) office segment, as reflected in an increase in their share from around 14-15 per cent in fiscal 2024 to an estimated around 20 per cent in fiscal 2026. Buoyant demand for flexible workspaces is expected to propel their share to about 25 per cent over the next two fiscals,” said Manish Gupta, Deputy Chief Ratings Officer, Crisil Ratings.

How much new capacity and investment is expected?

To meet growing demand, operators are expected to add 15–20 million square feet of new capacity across geographies, including Tier II cities and emerging micro-markets. This expansion will involve capital expenditure of ?4,000–4,500 crore over the next two years. 

Notably, nearly half of the upcoming capacity for the current fiscal has already secured letters of intent from potential tenants, indicating strong pre-leasing activity. 

The analysis, based on six major operators accounting for nearly half the industry’s capacity as of December 2025, highlights a diversified tenant base spanning IT/ITeS, BFSI, consulting and manufacturing sectors.  READ | $30.7 billion surge: India real estate sees record inflows, up 88% in 2 yrs

How are occupancy and profitability levels holding up?

Flexible workspace operators continue to maintain healthy occupancy levels, which have risen by around 300 basis points over the past three years to approximately 84 per cent as of December 2025. This is expected to remain stable in the medium term. 

Operating profitability is also projected to hold steady, with EBITDA margins expected to remain in the range of 15–17 per cent. 

Diversification across sectors, tenant profiles and geographies, along with lease renewal rates of 70–80 per cent, is helping mitigate risks associated with mismatches between long-term landlord leases and shorter tenant contracts. 

Despite significant capital expenditure plans, the sector’s credit profile is expected to remain stable. “Healthy cash accruals are likely to fund three-fourths of the planned capex, with the remaining financed through debt,” said Snehil Shukla, Associate Director at Crisil Ratings. 

As a result, the net debt-to-Ebitda ratio is projected to remain around 1x over the next two fiscals, broadly in line with FY26 levels.  READ | 

What risks could affect the flexible workspace market?

However, the report cautioned that global uncertainties could impact leasing activity, particularly among GCCs. 

Additionally, advancements in artificial intelligence may affect hiring trends in IT and ITeS sectors, potentially influencing future demand for office space. Even so, the flexible workspace segment is expected to remain a key pillar of growth within India’s commercial real estate market in the near term.