C o-working spaces, the new age mantra, is set to alter the commercial real estate market (CRE) in a substantial measure in year ahead. Businesses are embracing the pattern in a big way and it is expected that the trend would impact lives of over one million employees globally by 2018. Commercial firms with limited human capital or those requiring spaces in central business districts for a limited period, or the ones working on lean budgets, are opting for them. A JLL report released recently had estimated that investments in the co-working segment in India would soar to $400 million by 2018. The report had stated that the segment was expected to grow by 40 to 50% in 2017 and encompass one million square feet of leased work spaces by the end of the year. Furthermore, it had put the number of business centres offering co-working spaces at a little over 200 and had projected them to double in number by 2020.
Co-working set-ups are gaining traction from startups in major metros. A Vestian report quoting Deskmag’s annual co-working survey says 71% of the respondents feel that co-working is a creativity-booster while 62% report an improvement in productivity. According to Aditya Kumar Nayak, CEO-Vestian, startups get flexible working options at affordable centres, as they are offered seats at cheaper rental in an office-like environment, while enjoying an organised and synergised set-up along with business networking opportunities with the other members.
100% occcupancy
The JLL report says for the few institutionalised co-working operators operating in India today, occupancy level have been nearing 100%. It puts the break-even period for such operators at approximately five months after launching. In fact, marginal slowdown in the economy is likely to make the co-working options more attractive. It is also anticipated that co-working space will overtake the traditional serviced office by 2020.
Besides startups and young entrepreneurs, these spaces are ideal for global firms looking for a foothold in new markets for a testing period. Majority of co-working space providers claim that around 70% of their revenues come from their memberships with corporate clientele alone. Companies such as WeWork, Thrive and Spaces largely utilise this model across their facilities worldwide. On the flipside, security concerns and proximity to competitors are the looming concerns that most corporate end-users face when considering this model.
Four categories
According to the JLL study, the key drivers of co-working spaces in India are cost, infrastructure and networking opportunities. In Mumbai, National Capital Region (NCR) of Delhi, Bengaluru and Pune, a co-working space is likely to lead to cost savings to the tune of 20 to 25% when compared with leasing a traditional office space. The Vestian report categorises the co-working spaces into four categories along the requirements of occupier sets. These are: 1-Internal collaboration, 2-Co-working memberships, 3- Internal co-working, and, 4- External co-working. The Internal collaboration model is applied only within an organisation amongst its employees where they share knowledge and collaborate on pioneering ideas. This has a disadvantage as it does not suit independently working professionals such as software engineers, designers etc. The second model is considered suitable for business development professionals who need to proactively network, are self-sufficient and enjoy working independently.
Mentoring
In the Internal co-working model the space is managed by individuals or companies and is given to start-ups or small businesses with the aim of creating a hub of similar interests, where they receive mentoring services as well. Very few people are aware that Alphabet Inc., the parent company of Google, funded the project of futuristic self-driven cars under such a model till the venture became official as Waymo in 2016. However, in such an environment, there are risks pertaining to confidentiality.
The fourth model, i.e., External co-working, has more advantages for the co-working space operators as rent yield is higher. This is mostly resorted to by organisations looking for external facilities to conduct joint studies or collaborative ventures entailing high security. It provides for secure rooms and minimal disruption thereby facilitating specialised business functions such as coding complicated artificial intelligence algorithms, or mapping process anomalies etc.
Now that co-working spaces are becoming more and more competitive, this categorisation is coming handy in creating niche markets for differentiated services.
Currently, nearly 100 branded co-working space operators are operating in the market in India with 12 to 16 million sq. ft. area under them. The number is likely to go up four times within the next three years.
