SMBs find it difficult to hire and retain talent. They lose business and are unable to grow. Co-working spaces can help these SMBs find high-quality yet affordable offices — so they can grow and prosper, says Aditya Verma, Founder & CEO of The Office Pass (TOP).
In an exclusive interview with Sanjeev Sinha, Mr Verma talks about the growth prospects of India’s co-working industry, how it can help other segments, and the challenges being faced by it. Excerpts:
What changes are SMBs (small and midsize businesses) undergoing currently? How can co-working address these changing trends and enable SMBs grow faster?
Small and medium-sized enterprises are swiftly formalizing their businesses, driven by key factors such as demonetization in 2016, the introduction of GST in 2017, and widespread adoption of UPI payments. A record number of SMBs are opting for GST registration, which is a healthy sign for the industry as a whole.
A formal office for Indian SMBs is a large and untapped opportunity. These companies are hungry to make their presence felt in the formal economy and are also greatly aspirational.
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Indian SMBs currently work out of homes, basements, and unauthorized colonies because of cost pressures. They experience poor quality basic infrastructure like water, internet & power. Building maintenance is sub-optimal and office interiors are poor and unhygienic. Thus, SMBs find it difficult to hire and retain talent. They lose business and are unable to grow. Co-working spaces can help these SMBs find high-quality yet affordable offices — so they can grow and prosper.
With the pandemic, co-working and hybrid work models have gained wider acceptance. How do you think the notion of the workplace is going to evolve 5 years from now?
The COVID-19 pandemic made businesses realize the importance of being flexible and plan for the unexpected. Among the businesses, micro and small enterprises were the hardest hit. They used to live on a month-to-month survival basis and never intended for long periods of uncertainty. Many of these went out of business and took a long time to revive.
The pandemic also impacted mid and large-size businesses. Their revenues were hit hard and they resorted to cost-reduction measures to keep themselves afloat. Office operations cost is the third biggest cost for most businesses after marketing and manpower.
Businesses started looking for flexibility but very few traditional office providers were willing to relent. This presented a great opportunity for co-working players to be able to gain this business from traditional leases.
Hybrid and flexible workspaces allow businesses to scale their workspace requirements up or down based on their business needs. They could sign a short-term lease (rather than being locked in for 3-5 years with no flexibility). They could pay per seat rather than the area occupied. This helped us gain wider acceptance.
We believe many of these changes are fundamental to how co-working and hybrid work models will evolve over the next many years. The co-working industry, which currently accounts for 18% of all commercial real estate absorption in India, is expected to reach 25-30% penetration over the next 3-5 years.
What are a few challenges that still exist in the market? How can we overcome them?
The pandemic was a blessing for co-working players, some of whom successfully navigated through the COVID-19 period and reaped the benefits of the increased demand for flexible workspaces.
However, Covid-19 has also left a few challenges for the industry. Some co-working companies shut shop during the pandemic as they were unable to pay rent to the landlords. This impacted the supply side of the industry with landlords refusing to give spaces to co-working companies.
Co-working players are directly impacted by the current slowdown in startup funding as well. Over the past 18 months, there has been a funding winter that has forced startups to scale down their operations. We believe that this is a transient phase but will surely affect the industry in the short run.
How can co-working contribute towards a sustainable future?
Co-working plays a pivotal role in paving the way for a sustainable future. Firstly, co-working spaces excel in resource sharing. Rather than each individual or small business maintaining separate office spaces, equipment, and amenities, these resources are collectively utilized, resulting in a significant reduction in overall resource consumption and waste.
By implementing sustainable practices like the use of energy-efficient lighting, tree planting, the adoption of reusable cutlery, maintaining plastic-free offices, and advocating for waste reduction methods, the co-working industry can make a substantial positive impact on the environment.
Furthermore, the strategic placement of co-working spaces around residential areas significantly enhances accessibility. People can conveniently reach these spaces using public transportation, walking, or biking, reducing the necessity for long commutes in individual cars. This not only contributes to reduced traffic congestion but also curbs carbon emissions, aligning with eco-friendly and sustainable transportation practices.
How can co-working spaces aid in the success of a startup?
Indian startups face multiple challenges which prevent them from growing. Co-working spaces help startups overcome many of these challenges.
Co-working spaces are vibrant and youthful in their layout. This helps startups attract and retain talent. This is critical for any business, specially startups.
Co-working spaces are located in CBD areas of the city. The office location helps startups attract more customers. Startups working out of co-working spaces are able to pitch their products to other companies working from the same office.
Networking is an important parameter for any startup. By virtue of being in a shared space, startup founders are able to network with other founders who may be at the same or different stages of their startup journey.
Some co-working spaces also help startups in managing their hiring, accounting, fund raising, technology etc.
How is the industry adapting to trends in technology now? Will technology drive the future of coworking?
Coworking operators are extensively using technology to further their business. Many processes that were done manually about 3-4 years back are now being done using technology.
Coworking operators are reducing their dependence on feet-on-street manpower by adapting more digital means to attract new customers. This includes digital marketing, social media marketing, search engine optimisation etc. This helps companies lower their cost of customer acquisition.
Key processes like invoicing and payment collection are all done using digital tools. There is no physical invoicing or cheque collection, everything is paperless.
Coworking operators use online tools to manage and track customer experience. All customer queries are received digitally reducing manual intervention.
Security of companies, their employees and data is of paramount importance. Usage of digital tools like access control, visitor management software, security cameras, Hi-speed WiFi routers and firewall to manage ensures a comprehensive security system on behalf of the client companies.
One salient feature of smart cities is to have workspaces as close to homes as possible. How can we implement this concept in our existing metros?
Neighborhood co-working as a concept became popular post- pandemic when people were scared to use public transport. Under this concept, co-working spaces are located in CBD areas and around residential neighbourhoods so people can reach the nearest co-working office in under 10 minutes. This is good for companies, employees and environment at large.
Many co-working companies are taking this concept forward. These companies are able to attract customers who want to work in a professional environment but do not want to waste time in long commute.
With companies becoming more employee-friendly, the concept of offices close to homes will gain further momentum in the coming years.