Co-working Spaces Grow by 29% in Tier II Indian Cities, Driven by Enterprise Demand

Co-Working Spaces Expand Rapidly in India’s Tier II Cities​

New Delhi, March 23 — Co-working operators are increasingly targeting Tier II cities to meet rising demand for managed office spaces from corporations. According to US-based real estate consultant Vestian, over 575 centers covering nearly 9 million sq ft have been established across 17 smaller towns, accounting for nearly 29% of India’s total flexible workspace facilities.

Tier II Cities Driving Flex Space Growth​

The Vestian report, “Flex Spaces Reshaping Tier II Office Markets,” highlights that these cities collectively house over 8.8 million sq ft of flexible office space, representing more than 9% of India’s pan-country flex market. Average co-working centers in Tier II cities are 64% smaller than those in Tier I cities.

The 17 key Tier II cities are: Ahmedabad, Kochi, Indore, Jaipur, Coimbatore, Lucknow, Mangaluru, Chandigarh, Bhubaneswar, Dehradun, Vadodara, Surat, Trivandrum, Vizag, Guwahati, Goa, and Kozhikode.

Shrinivas Rao, CEO of Vestian, said, “The rise of Tier II cities is a defining shift in India’s expansion strategy. As infrastructure improves and flex ecosystems mature, decentralization of Global Capability Centers (GCCs) will become a cornerstone of the Viksit Bharat 2047 vision.”

Flexible Formats and Enterprise Demand​

Co-working operators lease spaces from developers and sublease to corporates, typically charging per desk. Flexible workspace offerings now include dedicated desks, private offices, virtual offices, and enterprise-grade managed offices.

Neetish Sarda, founder and MD of Smartworks, noted that while Tier I cities remain dominant in leasing, Tier II markets are growing due to cost advantages, improved infrastructure, and stronger connectivity. Smartworks operates in Coimbatore, Jaipur, Kochi, Ahmedabad, and Indore, and continues to explore new opportunities aligned with enterprise growth strategies.

Sanjay Chatrath, Co-founder & Managing Partner of Incuspaze, highlighted that Tier II and III cities are emerging as strategic hubs rather than satellite locations. Incuspaze centers in these cities maintain 90% occupancy, with planned expansion in Ahmedabad, Pune, Lucknow, and Jaipur in 2026.

Talent, Cost Optimization, and Market Potential​

Manas Mehrotra, founder of 315Work Avenue, emphasized that reverse migration, lower living costs, and government infrastructure development are driving demand for flexible offices in Tier II and III cities. SpazeOne’s co-founder Sijo Jose added that expanding talent pools and rising enterprise interest will accelerate this trend.

Shesh Rao Paplikar of BHIVE Workspace and Aashit Verma of Hanto Workspace agreed that emerging markets are pivotal for growth, with lower real estate costs, better infrastructure, and access to talent making these cities attractive to startups, large enterprises, and GCCs. Verma stressed that operators should focus on sustainable business models, strong occupancy, and consistent service quality.

Cost Savings and Sectoral Adoption​

The Vestian report notes that flexible workspaces in Tier II cities offer up to 50% cost savings compared to metros. Driven primarily by IT-ITeS, followed by consulting, BFSI, and Engineering & Manufacturing sectors, over 200 companies have established more than 300 GCC bases across major Tier II cities.