Flexible workspace providers look to take SEZ route to grow in top cities

New Delhi: Flexible workspace providers are eyeing denotified parts of special economic zones (SEZs) to expand in the main business districts of cities, with developers such as DLF and Tata Realty opening up spaces by denotifying parts of the buildings under the new regulations.

In the past few months, WeWork, Smartworks, Tablespace, Simpliwork, 91Springboard and Innov8 have taken space in SEZs in Noida, Gurugram, Hyderabad, Chennai and Kolkata.

In December 2023, the government had revised the SEZ Rules. The amendment permitted partial and floor-wise denotification, introducing fresh possibilities for utilisation within SEZs, especially benefiting the IT and ITeS companies as they currently dominate the SEZ landscape.


"Denotification of certain SEZs opens opportunities for flexible workspace providers like us by granting access to premium-grade assets in strategic business locations with built-in ecosystems. This access enables us to better serve enterprise clients and GCCs (global capability centres) seeking high-quality infrastructure, scalable solutions and top-tier amenities," said Karan Chopra, founder, Table Space. The company is in talks to lease about 500,000 sq ft at an SEZ in Gurugram.

"By operating in denotified SEZs, providers can serve a broader range of clients, including non-SEZ-eligible businesses, without being bound by the traditional SEZ regulations," said Kunal Walia, founder and CEO, Simpliwork Offices. "What's particularly compelling is the cost arbitrage - savings of 25-40% compared to other established micro-markets - providing significant cost advantages along with flexible leasing terms that help reduce tenant improvement expenses for flex operators."

Denotified SEZ office spaces provide substantial cost savings compared to other premium micro-markets, making them an attractive, cost-effective option for tenants and flexible workspace operators seeking to reduce operational expenses without compromising on location or quality. Simpliwork Offices has leased close to 150,000 sq ft at Capitaland Ascendas in Gurugram.

"This opens up a leasable space to a large segment of customers who prefer a flexible and asset light model on their books as opposed to a straight-line direct lease for a large space," said Anshu Sarin, CEO, 91Springboard. "It is a welcome change for all collaborators - end customers, developers and operators such as us. In our immediate expansion plan we are expanding into a few such A category assets to house IT/ITES enabled businesses." The company has taken around 32,000 sq ft in DLF Cyber City, Gurugram.

Smartworks, which has filed preliminary papers with the Securities and Exchange Board of India to raise funds through an initial public offering, recently leased 450,000 sq ft with developer ASF in Gurugram.

The ASF Insignia Campus is primarily an SEZ space, and the company is denotifying space to lease it to non-IT tenants.

According to industry estimates, about 20,000 hectares of SEZ land and 100 million sq feet of built-up area are currently vacant.

SEZs were originally set up to promote exports. As designated duty-free enclaves, they were treated as areas outside the customs territory of the country.

Multinational companies believe that there is no major financial benefit to operate in SEZs after the sunset clause, though the compliance requirements remain.

IT SEZs in India are predominantly occupied by IT services companies and the capability and service centres of multinationals.