It is essentially a profit sharing model where landlord was putting in the investment for infra build up.
Emphasising on flexibility and nimbleness as a critical lesson taught by Covid, Awfis founder and CEO, Amit Ramani said that going ahead it is crucial for companies to evolve with the changing workplace preferences. In an interview with FE’s Rishi Ranjan Kala, he said their managed aggregation (MA) model helped the firm beat the pandemic blues and aided in creating a sustainable business model. Excerpts:
How would you sum up Awfis’ journey so far?
When we looked at this landscape in 2015, we saw this as a SME solution, more than a start-up solution because start-ups at that point had less than 100,000 people in the ecosystem. So 60% of the commercial requirement was in SMEs and the rest was large corporate, mid-sized companies etc. So now we said how do we de-risk the model and that’s where the managed aggregation (MA) model came into play. We then started pursuing a part of our portfolio under MA. So between 2015 to 2018, that was the primary journey with SME focus. From 2018 we started seeing the trend of Managed spaces. So then our model evolved a bit where we did co-working centre. Third piece came when Covid happened which is our ability to provide solutions attuned to how people’s behaviour was changing.
What is the managed aggregation (MA) model?
It is essentially a profit sharing model where landlord was putting in the investment for infra build up. See one needs to understand that Grade-A real estate in India controlled by Grade-A landlords is 300 million sq ft (MSF) of the total 1 billion sq ft. Everyone talks only about the 300 MSF. India is a value for money market. So what we felt was that for that 700 MSF there was a big opportunity of being curated in the market which nobody was tapping.
Initial days were hard but today our credibility is strong and we are the only player servicing in the market, where you have a Grade-B or B+ facility with smaller floor plates and this could be not just be in CBDs, but in every commercial micro market. I think the fundamental piece is that there is a lack of trust in real estate. So the first thing we did was bring in trust. Second, we built a strong tech platform as well as a strong sales engine. Third, we were able to set up space which was more cost effective compared to others. Currently, MA is 60% of our portfolio and we will take it to 70%.
What has been your learning experience from Covid?
First, core is flexibility and nimbleness. You also have to figure out what if nobody comes back to offices. So those were the questions we were addressing, but at the same time we were pivoting for delivering and staying relevant for the ever evolving customer. For instance, the distributed model, Awfis at home solution, Awfis Transform and Powered by Awfis. We understood what was going to happen. We were able to do it as we were a pan-India player, we were a team of 200 people, we had strong understanding of customer base as well as real estate supply and demand. It’s not that everything worked out, but we evolved very quickly.
What are your expansion plans?
We were 30,000 seats pre-Covid roughly and we will go to 60,000-65,000 seats this year. We will double our footprint from around 2.5 MSF to more than 4 MSF this year. Also we will go from some 67 centres pre-Covid to almost 130 centres in 2021.
What are the challenges and opportunities for flex space?
Recently, JLL India said in a report that currently flex is 3% and will go to 5%. I don’t know what the ultimate percentage would be, but one thing is clear that it will grow from 3% in the next 3-4 years. Hard to predict but my optimistic view is that it will be 10% of the real estate industry. Second is the value of the brand, value of the network and the ability to deliver consistently for like-minded customers is important. Consolidation will happen and will be more with companies shutting shop rather than being acquired. Third, the customer base is not just SMEs and start-ups, but includes everybody even the government.
Final is the preference of workplace. Where work gets done is changing so work near home will become a reality and work from home for a small percentage will become a reality. Distributed work for every company is a reality. Also distributed work including in tier II towns is becoming a reality. For instance, we are getting queries from companies asking for 50 seats as a portion of its employees are working from Ahmedabad.