New Delhi, March 23 Co-working operators are expanding their business in Tier II cities to meet the demand for managed office spaces from corporations. According to Vestian, more than 575 centers, covering nearly 9 million sq ft, have been set up across 17 small towns.
US-based real estate consultant Vestian has released a report titled "Flex Spaces Reshaping Tier II Office Markets," which states that India's 17 major Tier II cities house more than 575 co-working or flexible workspace centers, representing nearly 29% of the total such facilities across India.
These 17 towns have over 8.8 million sq ft of flexible workspace, accounting for over 9% of the pan-India flex market. The average size of a co-working center is 64% smaller than that of Tier-1 cities.
Co-working operators typically lease office space from developers and property owners to set up their centers, and then sublease the spaces to corporates of all sizes. These operators generally charge per desk.
The 17 cities are: Ahmedabad, Kochi, Indore, Jaipur, Coimbatore, Lucknow, Mangaluru, Chandigarh, Bhubaneswar, Dehradun, Vadodara, Surat, Trivandrum, Vizag, Guwahati, Goa, and Kozhikode.
"The rise of Tier II cities is a defining shift in India's expansion strategy. As infrastructure improves and flex ecosystems mature, the decentralization of Global Capability Centers (GCCs) will become a cornerstone of the Viksit Bharat 2047 vision," said Shrinivas Rao, CEO of Vestian.
The Vestian report notes that the flexible workspace segment in Tier II cities has evolved. Operators are offering various formats, such as dedicated desks, private offices, virtual offices, and enterprise-grade managed office spaces.
Commenting on this trend, Smartworks founder and MD Neetish Sarda said, "While Tier I cities continue to account for the majority of leasing activity, we're also seeing Tier II markets gaining prominence, driven by cost advantages, improving infrastructure, and stronger connectivity."
Smartworks is present in Coimbatore, Jaipur, Kochi, Ahmedabad, and Indore, and the company continues to evaluate new market opportunities in line with enterprise growth strategies.
Sanjay Chatrath, Co-founder & Managing Partner of Incuspaze, said, "India's flex workspace market is entering its next phase of growth, with strong momentum building beyond metros into Tier II and Tier III cities. As enterprises and GCCs look to tap into diverse talent pools and optimize costs, these emerging markets are becoming strategic expansion hubs rather than just satellite locations."
Incuspaze centers in Tier II cities have an occupancy rate of 90%, according to Chatrath.
"In 2026, we are expanding our presence in high-potential markets such as Ahmedabad, Pune, Lucknow, and Jaipur, where companies are looking to access talent while staying asset-light and agile with premium office facilities," Chatrath said.
Manas Mehrotra, Founder of Bengaluru-based 315Work Avenue, said that flexible workspace providers are poised to capitalize on the growing demand in Tier II and Tier III cities.
He noted that organizations are looking to optimize costs, be closer to employees, and retain talent with flexible work options.
"Also, driven by factors such as reverse migration, the cost of living, and government-led infrastructural development, Tier II markets are poised to witness a significant upswing in workplaces," Mehrotra said.
SpazeOne co-founder Sijo Jose said this trend will accelerate, driven by expanding talent pools, better infrastructure, and rising enterprise interest beyond metros.
Shesh Rao Paplikar, founder of BHIVE Workspace, said that the company has been noticing a strong interest of enterprises in Tier II markets.
"In my experience, as companies prioritize talent retention and cost optimisation, these emerging markets will be pivotal for the next phase of growth for flexible workspaces in India," he added.
Aashit Verma, founder of Hanto Workspace, said that the growth of flex workspaces in Tier 2 cities is a clear sign of how workplace demand in India is evolving.
"With lower real estate costs, better infrastructure, and access to a strong talent base, these markets are becoming increasingly attractive not just for startups, but also for large enterprises and GCCs," he said.
Verma said that the focus for operators should be on building sustainable business models, maintaining strong occupancy, and delivering consistent quality as they expand into these emerging markets.
The Vestian report says that flex spaces in Tier II cities offer cost savings of up to 50% compared to metropolitan cities.
"Driven primarily by the IT-ITeS sector, followed by consulting services, BFSI, and Engineering & Manufacturing sectors, more than 200 companies have already established over 300 GCC bases across major Tier-II cities," the report said.
