From simple workplace with ungainly desks and chairs to better utilised spaces, automation and even added recreational facilities, office structures in India have changed significantly. One of the offshoots of this is the rise of workplaces that can be easily accessed anytime and from anywhere. A plug-and-play concept of office spaces.
In short, coworking or shared office spaces.
Buoyed by the government’s efforts to create a viable ecosystem for young entrepreneurs, India is witnessing the mushrooming of multiple startups and SMEs. Such businesses are increasingly focusing on coworking spaces.
Shared spaces are often in prime locations and provide an ideal platform for growth-seeking startups
They come at significantly lower costs than traditional office formats
They offer greater flexibility to both employees and employers
They do not require a massive fixed capital investment.
In the current scenario, this segment is expected to grow at an annual rate of almost 30-40%. There certainly exists an immense opportunity for multiple players to leverage the growth of coworking spaces in India.
Big names with big plans
Many players have aggressive plans to expand in this industry, including WeWork, InstaOffice, One CoWork, The Hive and Skootr Global. Backed by global investment firm The Xander Group Inc, The Hive plans to expand pan-India with a second space slated for launch in Chennai later this year.
While many players are jumping on the bandwagon and venturing into coworking spaces, it’s important to see how they keep up with the increasing demand without impacting their profit margins. As long as they can sustain a sound business model and earn a return on their investments, the business of coworking spaces will thrive for many.
Will coworking edge out traditional offices?
It has been estimated that by 2020, the demand for coworking spaces in India will surpass that of traditional office spaces. Nevertheless, while coworking has its own growth story spanning the last two years, traditional commercial real estate leasing market in India has also been on the up.
Large companies continue to follow the traditional form of business by leasing office spaces in prime locations. There was a significant rise of 22% in the overall leasing activity in Q1 of 2018 as against the corresponding quarter last year.
Also, coworking in India does come with its own challenges. While the big players have certainly got their formula right, many newer and smaller firms are struggling to identify the perfect business model — sub-lease, ownership or JVs.
In fact, many shut shop because they were unable to get the same returns on their investment as the prevailing market rate. Moreover, quite a few badly-conceived and improperly managed ones have security issues, are noisy and, at times, overcrowded.
Also, coworking is still perceived by many Indian companies as a major — and even suspect — divergence from the conventional style of work. These readings clearly indicate that while coworking spaces certainly see growing demand, conventional office spaces are not leaving the Indian commercial real estate landscape in any particular hurry.