Co-working spaces demand continues to rise, set to triple in 3 years

The increasing demand for flexible and co-working spaces is prompting higher absorption of the commercial real estate. While co-working companies took up 1.8 million sq ft in 2017, the first quarter of 2018 itself has exceeded the annual tally of 2017.

During the quarter, co-working players have picked up 2 million sq ft of office space with the highest transaction activity witnessed in Bengaluru, NCR and Hyderabad markets, which contributed 43%, 16% and 15%, respectively, showed data from Knight Frank.
There are close to 200 co-working players running an estimated 400 shared workspaces across the country today, compared with just Regus and a few localised players in 2010 running less than 30 such centres.

“Globally, the co-working space has seen a phenomenal growth between 2010 and 2018 and most of the growth has taken place in the last three years. Although the concept is relatively new in India, it has witnessed solid growth from nearly negligible existence couple of years ago to 2 million sq ft absorption in just a quarter,” said Samantak Das, chief economist & national director, Knight Frank India.

Given the expansion plans of major players and the increasing appetite for this format from occupiers, Das believes property owners and co-working operators could well see annual transaction numbers treble from the current levels over the next 3 years.

Co-working, or collaborative offices, a relatively new concept in India, involves various individuals, or start-ups, sharing a common workplace environment. It is steadily gaining momentum across prime Indian property markets due to relatively cheaper costs and the flexibility it affords.

“It’s not a fad; it’s here to stay for a long term. In addition to start-ups and SMEs, large corporates are now also investing in employees and better work environment for them to boost productivity. We are seeing a shift in the way people want to work, and we will continue to invest to expand our capacities,” said Karan Virwani, Director, WeWork India.

While Regus is the most established shared workspace operator in the country today with over 2 million sq ft and 20,000 seats under operation, WeWork and CoWrks are among the newest and aggressive players in this space. Regus is now taking note of the changing environment and adapting promptly.

“We have been bullish and focus on growth in India. We want to double our network in 36 months to over 200 centres in tier-I and II cities. We are adapting our design template, product and services offering to suit the new millennial employees,” said Harsh Lambah, country head – India, IWG Plc, that owns Regus and Spaces brand in the country.

WeWork and CoWrks started their India operations in 2016 and operate around 1.5 million sq ft and 1 million sq ft, respectively, with plans to more than double their footprint by 2019-end. Both these companies have acquired 0.7 million sq ft each of co-working space in Mumbai, Bengaluru and the NCR in the six months since October 2017.

Despite the growing demand for co-working space, experts agree, there are several challenges that this segment is expected to face apart from changing the conventional mindset of occupiers. Data security and privacy are also impediments in the way of a corporate taking up co-working space, especially as the value of data becomes an ever greater source of competitive advantage. Corporate occupiers, therefore, tend to lean toward co-working space with contained floors, or spaces, within the facility to overcome this risk.

The co-working business model is based on the operator’s ability to buy space long and selling it short. However, this is also a double-edged sword that makes it difficult to predict cash flows of such an enterprise. The average tenure of co-working space occupiers can vary from under six months to close to two years depending on the operator and the occupier profile. This makes, maintaining a deal pipeline, one of the most important parts of this business.


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