1. Co-working spaces: An evolution in commercial real estate

Co-working spaces: An evolution in commercial real estate

India is an evolving market and evolution has been a key driver for growth. The last decade and especially the past 5 years have witnessed a huge surge in non-traditional businesses, largely dominated by domestic startups and international e-commerce giants.

Published: May 18, 2017 11:33 AM
The co-working space is transforming real estate with the concept being established by start-ups, entrepreneurs looking for flexible and collaborative workplace solution.

By Kunal Jaiswal

India is an evolving market and evolution has been a key driver for growth. The last decade and especially the past 5 years have witnessed a huge surge in non-traditional businesses, largely dominated by domestic startups and international e-commerce giants.

The co-working space is transforming real estate with the concept being established by start-ups, entrepreneurs looking for flexible and collaborative workplace solution. These companies have created a fairly large and dominant position for themselves in the economy. The very fact that these startups do things differently, right from hiring young talent, market positioning, expansion that is reflected in their dynamic way of running and expanding day-to-day operations. The concept supports collaboration, innovation, knowledge sharing and openness. The primary key driver for the growth of this space are the technology and creative companies along with changing nature of work. With growing number of companies looking to adapt the benefits of co-working, it will become an integral part of the corporate real estate.

The office market has probably been the most impacted by this evolution, the e-commerce and startup companies have been one of the largest space occupiers and have taken up some landmark office spaces across the country at a much rapid pace. This accelerated space taken up by bigwigs and the nature of the operations have actually propelled the concept of co-working spaces in the past few years. A large number of global and domestic players have also adopted the benefits, including collaboration and flexibility of co-working spaces in a short span of time.

The co-working space concept has managed to create a new segment in the office property segment in the current market. Co-working setups offer quick and cost effective space solutions to companies looking to start, scale up and also expand their operations across cities. Co-working spaces are a very attractive space solution for small to medium size companies looking to rent/occupy cost-effective office space without investing huge sums of monies for relatively smaller timelines with added benefit of on-demand space.

Imagine the flexibility the companies can achieve by occupying a furnished space without having to commit a longer lock-in period which they would have to if they were dealing with the traditional leasing model and had to invest in fit-outs, whereas now the companies can focus on their business and invest their surplus capital in the business. The companies can also reduce operating expenses and get rid of paying higher rentals for fully furnished spaces. The customizations in design are also being offered by coworking spaces for mid-to-large space occupiers, where a particular design or layout can be provided to the occupier. This kind of flexibility along with affordable price makes it a very attractive space proposition.

Another key aspect of an evolving market is the fact that even co-working spaces are evolving on their designs, business models and thereby offering really smart solutions which are the need of the hour. In certain markets where new supply is limited, co-working spaces are a boon as they help in providing temporary solutions for companies who need to cope with expanding workforce and limited office space supply.

According to Colliers Research, co-working operators leased about 1.2 million sq ft in 2016 and accounted for 3% of the overall leasing volume. Although this represents a small share in overall leasing, co-working operators are making their presence felt due to large leases, indicating huge expansion plans.

Co-working spaces have emerged as a key product in the office space market that is here to stay and evolve. These spaces are a good indicator of upcoming demand for developers and act as a key accelerator for small to mid-sized companies that are cautious of costs and may not have the financial strength to invest and commit to a long-term office space in the traditional market and thereby not being able to take up quality office space for their employees.

Co-working spaces provide the desired flexibility to occupiers who are looking to take up plug and play spaces for their business operations. Cost optimization, effective space utilization and creating more collaborative workspaces should keep the co-working segment an attractive proposition that would keep evolving with tenant needs and also act as a trend setter for the traditional space owners.

(The author is Senior Associate Director, Office Services, Colliers International India)

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