Increasing number of new businesses boosts demand for co-working spaces: Report

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Published: December 13, 2018 2:15:08 PM

The co-working option is quite viable for the small start-up and corporate occupier alike because it comes bundled with the promise of a plug and play facility.

real estate, coworking space, real estate investment, startups, corporates, real estate in india, knight frank reportThe demand for co-working spaces is increasing also because there are several benefits of working in a co-working environment.

India today is witnessing a proliferation of start-ups and SMEs, buoyed by the government’s concerted efforts to create a sustainable eco-system for entrepreneurs in the country. On their part, the entrepreneurs—a large number of them being millennials—believe in harbouring global aspirations with a staggeringly ambitious mindset that was not in evidence a few years back. This provides a perfect platform for dynamic co-working business centres to cater to the office space needs of these aggressive growth-seeking start-ups, as per a recent research report by Knight Frank.

Besides companies, people such as business nomads, expats or those travelling to the country for a limited period are amongst those preferring to work out of plug-and-play co-working spaces. Another constituent is the growing volume of freelance workers (gig economy) who support corporate entities with specialised outsourced services in the advisory, consulting and designing domain such as recruiting and advertising. In fact, with the increasing number of new and growing businesses, there is a palpable demand for co-working spaces in metro cities that had hitherto been lying untapped.

The demand for co-working spaces is increasing also because there are several benefits of working in a co-working environment. Start-ups are characteristically capital poor and need to keep their cost structure at the bare minimum. Real estate expenses make up approximately 9% – 12% of overall operating costs (can differ from market to market) for an established corporate and could account for more in a start-up. Co-working spaces also enable the typical start-up to bypass the fixed rental cost with the additional capex requirements of fit outs and operational hassles of a traditional office space and opt for the flexibility of a co-working office.

This not only allows the new business to occupy a contemporary workplace on a per seat basis but also the flexibility to increase, reduce or to exit the workplace. This is a critical feature in early stage businesses particularly. More importantly, it allows them to focus on their core business rather than non-core operational areas such as real estate. This is also why additional services such as print-room and repooffered within co-working facilities are an attractive proposition, says the report.

Co-working players are adopting aggressive pricing strategies in order to poach the large occupier and showcase their service focused real estate offering as a turn-key business solution for all their real estate requirements. As evidenced by the rates for dedicated desks offered by a prominent co-working operator in BKC (New CBD) and Andheri (Prominent SBD) in Mumbai, the occupier actually gets a deal that is 5%-15% lower priced in the serviced workspace than if he leased in a similar property in the vicinity.

Thus, the co-working option is quite viable for the small start-up and corporate occupier alike because it comes bundled with the promise of a plug and play facility. Single occupancy cost (No CAM, OPEX etc) and the wider added benefits of adding further capacity as required and perks such as being able to access other office spaces of the operator across different locations, only sweeten the deal further. Thus, ease of working in such pocket-friendly and hassle-free set-ups is quickly increasing the popularity of co-working space across occupier groups, says the Knight Frank report.

Talking about this segment, Nakul Mathur, MD, Avanta India, says, “Co-working spaces are another leading segment which provides massive benefits like optimum and productive use of office spaces. In co-working we can avoid the idle and waste spaces of office and convert them into productive one by using it for meeting, to learn something new, training sessions and many more. Earlier, while selecting spaces, companies had to project the manpower of the next couple of years, prepare the budget accordingly and acquire space in commercial buildings. However now, corporates can acquire space as per the current scenario and can extend the office when required. This is not only cost-effective, but also ensures more flexibility as per the trending market.”

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