While global co-working company WeWork filed for bankruptcy three weeks ago in the US, it’s Indian arm and peers are thriving amidst the hybrid work models and flexible space strategy adopted by corporates and startups since the pandemic.
Take WeWork India, for instance. The Indian arm of WeWork reported a revenue of Rs 831 crore for April-September 2023, up 40% from a year ago, while Ebitda for the period was up 90% at Rs 532 crore. In Q2FY24, it posted a total revenue of Rs 426.1 crore, the highest revenue per quarter achieved for the firm.
For FY24, it is targeting an estimated revenue of Rs 1,800 crore, according to chief executive Karan Virwani. It plans to add over 20,000 desks and roughly 1.5-2 million sq ft annually. With digital products growing 46.5% from Q1 to Q2 this year, it plans to scale them up in the coming months.
Virwani said as corporates adopted a hybrid work model post-pandemic, there has been a 20% increase in WeWork India’s enterprise desk occupancy. “We have seen average prices going up by 10% annually to Rs 20,000 per seat at our centres, with average occupancy of 82%,” he said.
Smartworks, another player in the sector, has seen 97% growth in revenues in FY23 and FY24. Though initially growth was slower, H2 is seeing 50% higher growth compared with H1, according to Neetish Sarda, founder, Smartworks. The company has grown at a CAGR of 30% since FY21, he said.
“With more and more employees returning to work under the hybrid model, enterprises are intensifying their demand for managed spaces, as they are a cost-effective option to reduce overall operational costs and increase employee productivity levels,” Sarda said.
Compared to a traditional office, managed office spaces end up being 30-40% cost-effective, he said.
Global capability centres (GCCs) opening new captive centres are also contributing to the rising demand.
According to Sarda, with an average price of Rs 7,500 per desk a month, Smartworks is a hit with GCCs, which would otherwise have to spend Rs 12,000 per desk, per month to set up their own centres. “Big players are becoming bigger,” he said.
Smartworks plans to scale up to 13 million sq ft by next year from about 8 million sq ft at present.
Another workspace solutions provider, The Executive Centre, has seen revenues grow 34% in the last 11 months. The company is looking at a growth of 38% in 2023, said Manish Khedia, the company’s regional managing director – South India & Sri Lanka.
“As the workforce navigates the evolving landscape of remote work, flexible workspaces emerge as a pivotal element, catering to the changing needs of individuals and businesses alike,” Khedia said. The company plans to add 300,000 sq ft in India.
Sequoia-backed Awfis is aiming bring out the IPO in the co-working segment and plans to file the draft red herring prospectus with Sebi by middle of next year.
Awfis’s revenues grew 44.1% to `257.04 crore during FY22, according to the statements filed with the Registrar of Companies. The firm said it has almost doubled its revenue, getting closer to the Rs 600-crore mark, while reducing losses in FY23.
“Co-working spaces in particular are doing well because of the speed, flexibility, and increased distribution network capacity they offer. And companies are realising that they don’t want to invest their capital into real estate, and would rather invest it into their own business to grow,” said Amit Ramani, CEO and co-founder, Awfis.
The flex space market has grown significantly post-pandemic, with stock growing manifold since 2019, according to Vimal Nadar, senior director and head of research, Colliers India. “This growth is attributed to occupiers’ return-to-office mandate and the accelerated adoption of hybrid working models across large corporates. As a result, the share of enterprise clients has significantly gone up, resulting in increased leasing of flex spaces.”
In the last two years the demand is becoming broad-based, with occupiers across sectors like tech, consulting, and BFSI, also taking up flex spaces, Nadar said.
Flex space uptake by operators has risen every year, and was the highest ever at 7 million sq ft in 2022. As against this, 2023 has already seen 6.5 million sq ft of leasing by flex operators till September, 93% of the total leasing in 2022. The figure
is set to reach new highs by the end of the year, he added.
Flex space operators have now set up offices even in secondary and peripheral business districts. “Currently, secondary business districts dominate the flex market, with over half of the total stock, while central business districts face limited traction due to high rentals and limited Grade A office space options,” he said.
Presently, co-working spaces have around 53.4 million sq ft of stock spread across more than 1,000 centres, according to real estate consultant Vestian. The stock is estimated to cross 81 million sq ft in the next two years. “The stock is expected to increase further as large conglomerates call their employees back to the office. Moreover, the share of tier-2 cities in total office stock is also likely to increase as several businesses are targeting new local talent pool along with cost optimization strategies,” said Shrinivas Rao, CEO, Vestian.