Coworking adds to commercial real estate market expansion

With opportunities becoming more abundant for investors, the segment is growing fast and is favourable

February 10, 2023 01:52 pm | Updated 04:50 pm IST

The world of commercial real estate is on the precipice of a revolution as coworking spaces have become an increasingly popular choice for businesses of all sizes. In just a few years since their introduction, they have grown significantly. Flexible space stock in India reached about 47 million sq. ft. in H1 2022 and we expect it to cross 80 million sq. ft. by the end of 2025. In 2023, it is likely that coworking spaces will have a major influence on the commercial real estate market, with new opportunities for businesses, entrepreneurs, and investors alike.

Wellness and retention

In the aftermath of the pandemic, companies are more focused on investing in employee well-being and finding sustainable ways to conduct their business. It has led to the return to offices, though often with a hybrid approach. The scenario has led to companies downsizing their spaces. Many are choosing to rent customised coworking centres, where teams can come together and collaborate on projects.

Strong leasing

It is worth mentioning that customisation gives coworking players an edge and makes them a more stable segment. With the demand for offices peaking to pre-pandemic levels, flex spaces have contributed to the overall leasing of space. Recording 20% of the entire leasing market in the country, the segment has attracted several large and small occupiers. Corporates that are recalibrating their workspace models have collectively leased more than 75,000 seats in the first half of 2022 compared to 60,000 seats in 2021. Leading cities, including Bengaluru, Pune, Hyderabad, MMR and NCR, have seen the maximum traction. It is likely that the market will firm up further in 2023.

Investments to pour in

Investors have become aware of the recent upsurge in the coworking segment and have taken advantage of it by putting their money here. India’s co-working space market is likely to cross 50 million sq.ft. by 2023. Several players in the industry have not only been able to gain the trust of their customers but have also received investments from private equity and venture capital firms. Cerberus Capital, KKR, and Blackstone are some of the major firms to have invested in the segment. The trend is likely to continue this year.

With opportunities becoming more abundant for investors, the segment will become more lucrative for growth. However, operators need to bear in mind the budget-friendly factor. As demand grows, tenants may find it challenging to rent in some of the popular spots. But the industry must aim to provide service to customers, earn their trust and offer the right solution to clients.

The writer is Deputy CEO, Awfis.

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