July 24, 2018

According to JLL, in January-June 2018, co-working firms leased 19 lakh sq ft, compared with mere 6.4 lakh sq ft in the first half of 2017

Co-working, a western concept that involves various individuals or startups sharing a common workplace environment, is slowly catching on across prime Indian property markets, with the segment reporting around three-fold growth over 2017.

According to JLL, in January-June 2018, co-working firms leased 19 lakh sq ft, compared with mere 6.4 lakh sq ft in the first half of 2017. In 2017, co-working took 5% of the leased space in the country. Ramesh Nair, CEO & country head, JLL India, said, “Co-working saw a great start in the country and is likely to play a strong role in shaping the future supply-demand dynamics by changing the way the serviced office industry works.”

Many startups and an increasing number of companies prefer co-working spaces to conventional office spaces due to lower rentals, savings on operational costs and a more flexible work environment. A company can save as much as 30% on the operational cost alone, according to some estimates.

Besides, the lock-in period for co-working spaces varies between one and three years while companies lease conventional office spaces for five years followed by another five years, or for three years, followed by two extensions for a similar period.

“So far, we have leased 1.1m sq ft across cities and are further looking to add 1m sq ft by March 2019,” said Sidharth Menda, CEO, CoWrks. The growing opportunities have also led to mushrooming of co-working space providers. The growing opportunities have also led to mushrooming of co-working space providers. Some of the large players in the segment includes Wework, CoWrks, International Workplace Group that operates Regus and Spaces and Awfis.

“Flexible working space is the fastest-growing segment worldwide and we see many players and startups getting into this segment. It not only widens the segment but is also helping conventional corporates by providing them with such spaces. In such properties, companies get to save on other operational costs such as IT infrastructure, fitments, housekeeping and broadband connectivity. For space and cost efficiency, companies are consolidating and moving into co-working hubs.

According to real estate services firm CBRE, the global average utilisation of assigned seats is 60%, excluding vacant seats, while the global average meeting room utilisation is just 30%. According to CBRE, 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.

In the long-term, however, consolidation among coworking operators will occur, as not all of them will be able to mitigate the risk in their business models or have deep pockets to survive for long in non-prime locations with cheaper rents. Only a handful of big players are expected to eventually remain.

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Source: realty.economictimes.indiatimes.com