A new report by Colliers India and CRE Matrix says startup companies in India are looking to expand into shared offices in a big way.
Between 2022 and 2024, the report anticipates startups to lease 30% more office space in six major cities in India than they do currently. This should amount to about 29 million square feet of office space, compared to the 22.4 million square feet that was leased between 2019-2021.
The report predicted that leasing activity from startups will reach 78 million square feet by 2024, accounting for 13% of all office space (compared to just 2% in 2010.)
The new demand, Colliers India says, will be principally led by logistics companies and fintech startups. The researchers maintain these sectors have gained momentum following the pandemic because they transitioned well to promoting their online platforms and capitalizing on the growing trend of e-commerce.
“Increased entrepreneurship and rapid growth of startups have been one of the most remarkable trends in Indian office space,” said Colliers India CEO Ramesh Nair. “As startups pick up the pace, landlords need to consider the business life cycle and work preferences of the startups to capture the real estate demand from startups to drive more value.”
Right now, global corporations still account for the vast majority of office leases in cities across India, occupying more than 60% of total office space as of 2021. However, the sector that’s seen the most growth has been startups, which now lay claim to 10% of office space in India.
India’s startups have seen record-breaking growth in recent years, which was made clear in the 2021 NASSCOM Tech Startups Report by Pari Natarajan, CEO of Zinnov.
“Indian startups are fast becoming the champions of India Inc’s growth story with the number of direct and indirect jobs being created, driving significant economic and social growth. Not to mention the 2X increase in private market valuations. In 2022, the Indian startup ecosystem is poised to catapult its journey, with continued momentum across investments, M&As, IPOs, and unlocking value from breakout verticals such as Agriculture, Gaming, Blockchain, Web3, Automotive, and Manufacturing,” the NASSCOM report states.
The report also stated that over 2,250 new tech startups were founded in 2021 alone, taking the total to near 26,000.
Moreover, 29% of all startups were based outside of already-established hubs, which is what seems to be driving the need for new office space now. Those startups also had $24.1 billion total to their names, three times more than the year prior and a statistic that’s only expected to grow.
Both reports also touched on the concept of startup “unicorns,” a term used among venture capitalists to describe budding companies that are valued over $1 billion.
The Colliers India-CRE Matrix report claims that fintech and logistics startups have a better chance of becoming unicorns not necessarily because of their digital commerce successes, but because they tend to operate under lenient and more favorable government policies.
Furthermore, fintech and logistics startups have a more expansive talent pool to choose from in India, since STEM fields are so heavily emphasized in modern scholastics and students are eager to choose fields where they can have good income streams.
Finally, venture capitalists are seeing the same statistics as the researchers, driving them to invest further and produce more unicorns as a result. NASSCOM says three times more investors participated in mega-rounds in 2021, and there were over 750 unique institutional investors that year (a figure 1.8X higher than in 2020).
In 2021, NASSCOM says there were 42 new startup unicorns in India, which is 3.5X more than the year before. Banking, financial services, and insurance, the researchers say, accounted for 13 unicorns and 35 potential future unicorns in 2021. They also took up 25% of total investments.