Flexible workspace capacity to grow 16-18% over next two fiscals; credit profiles to remain stable: Crisil

New Delhi [India], May 5 : India's flexible workspace segment is expected to expand its capacity by 16-18 per cent over the current and next financial years to reach 140-145 million square feet, driven by rising demand from global capability centres (GCCs), domestic corporates and start-ups, according to Crisil Ratings.

The report noted that the segment has already witnessed strong growth, expanding at a compound annual growth rate of around 23 per cent over the past three fiscals through FY26.

The demand for flexible workspaces is being supported by corporates seeking agility, cost savings and hybrid work models, with such spaces offering lower upfront investments, flexible lease terms and the ability to scale operations quickly.

Manish Gupta, Deputy Chief Ratings Officer, Crisil Ratings, said, "Flex operators are emerging as a key growth driver of net absorption in the commercial real estate office segment, as reflected in an increase in their share from around 14-15% in the fiscal 2024 to an estimated ~20% in fiscal 2026."

"Buoyant demand for flexible workspaces is expected to propel their share to about 25% over the next two fiscals," he added.

Crisil said operators are expected to add 15-20 million square feet of capacity across new geographies, including Tier II cities, with capital expenditure of Rs 4,000-4,500 crore over the next two fiscals.

The report noted that strong demand has already resulted in letters of intent from tenants for nearly half of the upcoming capacity in the current fiscal.

Despite expansion plans, credit profiles are expected to remain stable, supported by healthy cash flows.

Snehil Shukla, Associate Director, Crisil Ratings, said, "Despite large capex plans, leverage is expected to remain steady for flex operators, supported by healthy cash accruals, adequate to fund three-fourths of the total capex. The remaining portion is expected to be funded through debt. As a result, the net debt-to-Ebitda ratio is projected at around 1 time over the next two fiscals, akin to fiscal 2026 estimates, which should keep credit profiles stable."

The report also highlighted risks such as potential mismatch between long-term lease commitments and shorter tenant contracts, though diversification across sectors, geographies and tenant profiles, along with lease renewal rates of 70-80 per cent, provides some mitigation.

It added that occupancy levels, which reached around 84 per cent by December 2025, and operating margins of 15-17 per cent are expected to remain stable in the medium term.

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