Co-working companies delay expansion plans as Covid hits business

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Published: June 17, 2020 1:40 AM

The pandemic-led disruption, nonetheless, is a short-term development and business should look up from the second half of the fiscal year, companies reckon.

After all, a price differential of nearly 15% over traditional office spaces (according to analysts) seems too lucrative a deal for potential clients to overlook at a time when the priority is cash conservation.After all, a price differential of nearly 15% over traditional office spaces (according to analysts) seems too lucrative a deal for potential clients to overlook at a time when the priority is cash conservation. (Representative image)

As Covid-19 makes work from home the new normal at least in the foreseeable future, players in the co-working space are rejigging their expansion plans. While some have pruned the size of office spaces that they were looking to add to their existing portfolios, others have delayed targets. The pandemic-led disruption, nonetheless, is a short-term development and business should look up from the second half of the fiscal year, companies reckon. After all, a price differential of nearly 15% over traditional office spaces (according to analysts) seems too lucrative a deal for potential clients to overlook at a time when the priority is cash conservation.

Neetish Sarda, founder at Smartworks that raised a fresh $25 million in funding in November, said initially the company had decided to add an additional space of 3 million square feet across the seven big cities it operates in, thereby getting to a total of 5.5 million sq ft by the end of the year. But with the pandemic having slowed business in the last three months, the company has revised the target and now plans to add 4.2-4.5 million sq ft of space by December. The firm has also reduced its FY21 revenue forecast by 7%-8%. To make up for the cut in expansion, Smartworks is in active discussions to acquire other players in the space which he believes is headed for consolidation. Sarda said business should be back to normal by September-October and the company is seeing a spike in enquiries from potential clients by as much as 70%. “The deals will take time to materialise but decision-making should commence around the end of July or early August,” Sarda told FE.

Ankur Gupta, co-founder & CEO at ABL Workspaces, said the company was looking to go live with 15,000 seats and 50 centres in Delhi-NCR by March 2021, but the firm has delayed the expansion plan by a year. With the company offering discounted rentals to clients for a few months, revenues have certainly been impacted. Likewise, Gupta said the company has proposed a negotiating cost to its landlords to tide over the crisis. “They are offering us some relaxation or rent deferment to continue with our engagement,” Gupta added.

Amit Ramani, CEO & founder at Awfis, said although fresh expansion plans are not on the cards, it will continue to open centres that are underway. Before lockdown, till March, around 10 centres were underway and another 10,000 seats were under LoI (letter of intent). “Pre-Covid, we had 2.5 million sq ft of commercial real estate footprint, which could expand to 3.5 million sq ft by the year end,” Ramani said. Occupancy levels at the firm’s co-working centres are at 10%-30% and Awfis is seeking waivers on fixed rental payments from landlords.

India is the second-largest co-working market in Asia after China. Its share in annual leasing went up to 14% in CY19 from virtually nil in CY16, emerging as the second-largest contributor to office space demand, analysts at Edelweiss said.

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