What is driving the growth of co-working space in India?

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Published: March 6, 2019 12:36:50 PM

Flexible workplaces in India are growing at a rapid pace, with flexi operators leasing the highest ever in 2018.

real estate, Flexible workplaces, coworking space, business centers, Millennials, startupsThere are, in fact, multiple factors driving the flex workplace space.

Flexible workplaces (co-working and business centers) in India are growing at a rapid pace, with flexi operators leasing the highest ever in 2018. Leasing by flexi workplace operators crossed 7 million square feet during 2018, according to Colliers International, accounting for 14% of the total leasing during the year.

“Bengaluru accounted for the highest share of leasing by flexi operators, followed by Mumbai and Delhi-NCR. Demand for flexi workplaces centers in India was first led by startups, before MNCs and large enterprises took the plunge by taking up space in co-working workspaces,” says Vineet Anand, Director-Office Services (NCR) at Colliers International India.

There are, in fact, multiple factors driving the flex workplace space. Millennials, who currently form about 46% of India’s workforce, will influence the working culture as India’s gig economy gathers steam. India has over 5,200 startups, strengthening its position as the third-largest startup ecosystem after China and the US, and, therefore, startups are likely to continue to take up seats in shared workplaces. Interestingly, enterprises are opting for such spaces owing to higher flexibility, as well as greater ease in setting up offices without many administrative hassles.

“We foresee large enterprises gaining further exposure to flexi spaces, by adopting a strategy of core + flexi, wherein they maintain traditional offices, but also take up space/seats in co-working centers. A growing number of companies will continue to base some teams out of shared workspaces as they enter newer markets or set up new teams,” says Anand.

Developers say that the market size for co-working spaces is huge with the requirement of more than 16 million seats and around 9 million sq ft expected in the coming year. “The reasons behind the increase in demand are — rising office rentals across business districts in India and co-working space not being restricted only to start-ups and freelancers. The main offering of co-working space, however, remains the same – to save the cost for companies by providing maximum facilities in the same amount,” says LC Mittal, Director, Motia Group.

Growth Prospects and Future Trends

# Flexible workplace operator companies are transforming into managed space operators, wherein they are offering the entire centre to a single tenant, who in turn is looking for quality space with some flexibility. This trend will continue in the future too.

# Along with the top three cities of Bengaluru, NCR and Mumbai, operators are likely to expand rapidly in Hyderabad, Chennai and Pune.

# Post the current expansion stage, which is likely to last for 2-3 years at least, experts foresee consolidation in the market through mergers, and stake purchase by institutional investors.

According to CBRE, in the next few years, with office rents continuing to move up across India, the total space leased by co-working operators in tier-1 and tier-2 cities could touch 6-10 m sq. ft. by 2020.

Shouvik Mandal, CEO of Apeejay Real Estate, says, “The co-working space model is increasingly becoming popular in India. To encash on this opportunity, big players from the realty sector are also turning their focus to it. Our company, for instance, is already providing its services in the big cities of the country to cater to the needs of business enterprises. We have opened Apeejay Business Centers in Chennai, Gururgram, Kolkata, Mumbai, Navi Mumbai, and Pune. We are providing shared serviced office spaces to more than 100 big companies, medium-scale organizations and start-ups to expand their business.”

Avanta India is another real estate company which offers co-working space in Delhi and Gurgoan across all its business centres. The company now owns four business centres in New Delhi and one in Gurgaon, offering office solutions to businesses of all types.

Nakul Mathur, MD, Avanta India, says, “This business model is growing in India over the last few years at a steady rate, but now it has picked up pace with the mindset of people changing towards sharing the spaces. It has more to do with the cost of having a separate office in case of small and medium companies and saving time in case of bigger companies. By 2025, it is expected that around 42 per cent of the population in India will work in urban centres and hence the demand for office space will increase manifold. With economics playing on the mind of many new businesses, the demand for shared office space will grow tremendously in the next decade.”

Amit Raheja, CMD, Wealth Clinic, says, “Having ‘Uber Cool’ office is the dream of every company but the amount of time and money it requires is not everyone’s cup of tea. Here the co-working spaces come into the picture. Initially, in India we had co-working spaces with only the start-ups in mind, but now well developed and luxury office spaces have also become a trend. A paradigm shift in the co-working industry is on the anvil as an era of flexible office spaces is here to stay. The industry is expected to grow by 40-50 per cent by the end of this year itself.”

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