Scale and Smart Tech to Reshape Office Costs, Small Occupiers Face Premium Burden

Scale and smart tech to reshape office costs as small occupiers face premium burden: Knight Frank India

New Delhi, May 16

While large campuses already enjoy significant cost advantages through automation and centralised systems, the gap between small and large occupiers may narrow as technology reduces manpower dependence and improves efficiency across all formats, Knight Frank said in a press release on Saturday.

Mumbai, Bengaluru and Gurugram remain India's most expensive office markets for facilities management, with small occupiers bearing the highest per sq ft costs due to limited scale and higher manpower intensity. Knight Frank India's latest FM cost assessment across eight major cities shows that smaller offices, typically startup hubs, boutique corporate spaces and flex centres, face disproportionately higher operational expenses compared to larger campuses.

In the 10,000-30,000 sq ft category, offices in Mumbai, Bengaluru and Gurugram recorded FM costs of INR 25.52 per sq ft for 12-hour operations, rising to INR 27.52 per sq ft for 24x7 operations. The cost burden is even steeper in the 30,000-50,000 sq ft segment, where expenses reach INR 27.65 per sq ft for standard hours and INR 29.65 per sq ft for round-the-clock operations. "Small office occupiers continue to face the highest facilities management costs across all major office markets due to limited scale efficiencies and higher manpower intensity per sq ft," the report states.

By contrast, large office campuses of 300,000-500,000 sq ft benefit the most from economies of scale, with FM costs dropping to INR 13.65 per sq ft for 12-hour operations and INR 15.65 per sq ft for 24x7 operations in the same three cities. The savings are driven by integrated infrastructure, centralised command systems and optimised workforce deployment. "Large office spaces between 100,000-500,000 sq ft benefit most significantly from economies of scale, integrated building infrastructure and centralised command systems, resulting in the lowest per sq ft facilities management costs across all office categories," Knight Frank notes.

Mid-sized offices of 50,000-100,000 sq ft sit in the middle, with FM costs at INR 24.80 per sq ft for 12-hour operations in Mumbai, Bengaluru and Gurugram, and INR 26.80 per sq ft for 24x7 operations. The report highlights that operational cost differentials narrow for larger campuses as automation and centralised systems reduce the premium associated with 24x7 functioning.

Pune and Kolkata emerged as the most cost-efficient markets across all categories, with small office FM costs ranging between INR 21.13-24.55 per sq ft and large office costs between INR 11.30-15.53 per sq ft. Security costs remain elevated in gateway cities, averaging INR 3.40-3.65 per sq ft for small offices due to higher guard deployment and compliance requirements, while large campuses keep costs stable at INR 3.00-3.25 per sq ft through access automation and integrated surveillance.

Pawan Koyal, Executive Director and Head of Facility and Asset Management at Knight Frank India, said, "Facilities management has evolved into a strategic business function as occupiers increasingly prioritise operational continuity, workplace experience, sustainability and employee wellbeing." He added that while gateway markets command a premium due to "higher workforce costs and demand for sophisticated workplace management solutions," scale efficiencies are reshaping the cost curve for larger occupiers.

The report concludes that as multinational occupiers, GCCs and IT/ITeS firms expand large campuses, the push for smart and sustainable workplaces will accelerate demand for integrated FM services nationwide.

— ANI