As companies increasingly incorporate hybrid work model within their operational strategies, demand for services offered by co-working firms has surged. Coworking companies which typically specialise in managing flexible workspaces say that much of the growth is being led by the IT/ITeS and BFSI (banking, financial services and insurance) sectors.

“We foresee this trend to continue. The pandemic has created a desire for asset-light models which enable adaptability. Since the lockdown, we have seen a 10% increase in our enterprise portfolio, bringing the total to over 60% enterprise members across India,” says Karan Virwani, CEO at WeWork India

In a departure from the past when large enterprises usually had one consolidated office in a particular location, corporates are now looking to establish a distributed work model wherein the idea is to set up four to five office spaces within a specific city. Such a model helps in accessing talent and supporting business continuity in case of lockdowns which are largely localised in nature, explains Neetish Sarda, founder at Smartworks.

“Companies do not want to bear the hassle of running multiple offices and that is why they are signing up for co-working spaces,” Sarda. For Smartworks, the IT sector forms about 55% of its clientele. Sarda says that the IT industry also covers as much as 60% of India’s real estate portfolio.

Opting for coworking spaces, some of which have centres in non-metros also allows companies the convenience of providing a work set up to employees who have migrated to their hometowns amid the pandemic. Almost 60% of the workforce from the top seven cities has gone back to their native places and potentially 10% of them will never get back to their original work stations, estimates Amit Ramani, founder & CEO at Awfis.

“Even within the core locations, wherever companies are getting opportunities to discontinue their conventional rental leases, they are doing so and setting up managed offices with the help of co-working firms,” says Ramani. Lock-in periods of rentals for conventional offices typically range between five to six years but coworking firms offer lower lock-in periods starting from 24 to 60 months, explains Ramani.

“Coworking industry is a way to go as many companies look for flexibility on investments in land and buildings, rental payments, and proximity to workspace for the employees,” says Gauravpreet Sethi, director, sales at 91springboard.

With demand shooting up, coworking players are lining up expansion plans. Smartworks is already venturing into tier two cities; the company will go live in Coimbatore, Kochi, Jaipur and Ahmedabad in the coming months. “We grew from around 2.8 to 3 million sq.ft. pre-Covid to about 5.4 million sq.ft. The target is to get to about 20 million sq.ft. in the next three years,” says Sarda. Awfis will add 100 new centres this year of which about 40 will go live in the next 90-100 days. The expansion will broaden its seat count to about 120,000 from the current 62,000 and cover new cities like Indore, Kochi, Nagpur and Lucknow. 91springboard has signed 3,000 new clients since the onset of the pandemic and plans to double its existing capacity over the next two years to cater to the growing demand. WeWork says that it has leased more than 1.7 million sq. ft. of office space to large enterprises and smaller firms last year including Tata Sky Broadband, Colliers India and global technology firm 3M.

ABL Workspace that has so far been primarily operating out of Delhi-NCR with 2,500 seats is now targeting adding 15,000 seats across the country by March 2023. Mumbai, Pune, Bengaluru and Hyderabad are some of the major markets it is eyeing. Besides, the firm is keen on foraying into tier two and three cities given that tech companies have started booking space in smaller cities to save costs. “Coworking will be a good solution for such budgeted problems,” its founder and CEO Akshita Gupta tells Fortune India. It just closed a deal with Kotak Mahindra Bank too.

For Awfis, large enterprises now contribute almost 50% to its business compared to 25%-30% earlier. ABL Workspace has seen about 30%-40% growth. “Enterprise customers who were fence-sitters pre-Covid came in a big way,” says Ramani.

In an interaction with Fortune India earlier this week, CP Gurnani, CEO at Tech Mahindra, said that the company expects to utilise less than 50% of the firm’s office spaces in the coming months. “With flexible working that allows work from anywhere, my employees now have the choice to come to the office or choose their preferred location of work,” says Gurnani.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.