The co-working model started off as an offering for self-employed, independent professionals who wish to work together in a communal, collaborative setting as opposed to the traditional model where office space is occupied by employees of a single organization. The rise in self-employment has led to an explosion in demand for co-working space, particularly from millennials in tech industry startups. However, the industry has since evolved with multiple variants in different countries. It’s moving towards an enterprise version where corporates and operators have started working closely together. This trend has prompted established developers to launch their own co-working platforms.
Arguably the co-working craze was popularized by WeWork and they did the heavy lifting of increasing adoption rates. First with entrepreneurs and then with corporates. Co-working model was mainstream when firms like IBM & HSBC included it as part of their real estate strategy. I believe that it was a turning point to globalizing the model.
The flexible office model started gaining momentum around 2010 in US but didn’t catch on in India until 2016. According to our data at Propstack and confirmed by CBRE and JLL American companies are the biggest lessors of commercial office space in India, occupying about 40-45 per cent of the grade ‘A’ space. While the enterprise model evolved over four to five years in US, it is already the most popular use of co-working in India after only two years. This is particularly relevant for multinational companies as they face restrictions in buying property in India and prefer flexible tenures and lower CapEx in case of an unexpected downturn.
Co-working now takes up approximately 30 million square feet of space across US. In India it stands at around 6 million sq.ft. of ready to occupy branded and unbranded spaces and 2 million sq.ft. under plans. This currently constitutes 12-15% of the overall market. There are around 4500 co-working operators in India with close to 350 co-working companies. Considering that on an average 40% of the co-working spaces are profitable while 60% lose money, consolidation is bound to happen in the industry. Revenues from private offices in co-working spaces in US is rising faster than the availability of space while in India the demand is higher for open offices due to lower occupancy costs. Any consolidation can be in the form of an acquisition or larger players forming an alliance with regional players for better reach and economies of scale.
In the U.S. pricing for co-working space can be anywhere from a few hundred dollars a month to thousands. The large variance is due to a few factors including location, amenities and membership benefits.
The pricing in India ranges from 70 dollars to 500 dollars per seat. It primarily depends on the location and building grade.
The US has already seen the emergence of niche co-working players from cannabis to women only co-working spaces. This trend is yet to catch up in India and is expected to develop over the next few years as occupiers get used to the model and demand increased customization.
You will see increased automation in the majority of the co-working spaces in US. There are a variety of ways to automate your co-working space and make occupiers/members as self-sufficient as possible, including having new members register themselves, enabling them to reserve meeting rooms, giving members access to their statements, and letting them update their information and payment method.
Automation can also give space operators the ability to do things remotely, such as unlock doors and see who’s in the space at any time. However, barring some of the larger players, the level of automation is low in India.
One of the major reason’s occupiers prefer co-working spaces is the tenant experience. Personalizing the experience and using data to create tenant centricity in a manner that is experienced in the hospitality business is the next level in the co-working business. While we have seen a meteoric rise of multiple players offering spaces or experiences that are tailor-made in US, we expect to see the maturation of similar players in India over the next few years.
With its exponential international growth and several new concepts, co-working is beginning to transform every industry in the world.
Over the next decade, demand for co-working spaces is expected to increase in India with significant shifts in population to urban centers. Traditional landlords will increasingly start feeling the pressure of competing with co-working operators who could also be their tenants. And the concept of customized coworking spaces and alternate ‘workspaces’ at Hotels, Starbucks cafes will gain in popularity. Most entrepreneurs and small and medium enterprises will opt for locations and co-working spaces which provide better amenities and services.
People will prefer working out of multiple co-working centers to suit their convenience and share their latitude and longitude as their “current address.” In the age of sharing economy when you’re traveling between locations with a ride-sharing app, this could be a perfect synergy between co-working and ridesharing. Co-working spaces will not only encourage entrepreneurship in India but will play a vital role while they set up and scale their operations.