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Real estate research firm Cushman and Wakefield’s survey suggests that the co-working sector in India expanded its portfolio aggressively in the late half of the year 2022.
To put it in numbers, the year 2022 saw an addition of 21 percent more area, to the tune of 4.91 million sq ft, to the co-working sector. This has set the ball rolling and prepared a solid ground for robust growth in the year 2023.
Why are coworking spaces in great demand? Was it always the same? What was the impact of COVID on coworking spaces in India?
Let us explore more reasons as to what set this industry in momentum…
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Even before the epidemic hit the Indian real estate markets, there was a trend showing that some businesses were gradually choosing to rent space in coworking spaces to take advantage of the all-in-one facilities in regards to their office space needs.
However, when the first lockdown was imposed in 2020 many expressed concerns about whether occupiers would want their employees to work in co-working centers because they are generally viewed as high-density shared spaces. Subsequently, the following year saw a sharp dip in the occupancy.
As economic activities returned to normalcy and business outlook improved towards the end of 2021, companies mulled over their near to medium term space requirements and ways to bring employees back to offices safely.
Health and wellness of employees became a priority, coupled with short term cost optimization to address issues surrounding adverse impact from business
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cycles. All of this coupled with other minor reasons gave the coworking Industry a massive push.
Why are Coworking Spaces in Demand ?
Coworking spaces are in demand because of the following reasons:
Firstly, since it appeals to both small and large businesses, coworking set up is expected to soar. All businesses benefit from co-working spaces because they are affordable, practical, and expandable. Also, de-centralization of offices and workplace agility have become essential factors in the post pandemic period and managed offices fulfill these requirements of occupiers.
Second, companies want to focus on their core competencies and leave office space management to someone else. This helps save them time which they can invest in other areas.
Third, To meet the hybrid working format, which is gaining prominence amongst global employees, some managed space operators are also expanding into tier-II cities, largely on a requirement basis at present.
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Space Owner’s Perspectives
Looking at it from an opposite perspective, it has sought to become a highly enticing business model for micro-franchise entrepreneurs and landlords, they are able to generate huge profits by making use of unutilized spaces and making use of the low cost entry point.
An initial investment of Rs 20 lakh to Rs 1 crore and workspace ranging from 2500 to 10,000 square feet is needed to start a coworking franchise in India. As a result, many micro-entrepreneurs are joining the market and investing money to start a franchise.
The need for tech-enabled workspaces will only grow in the future as the epidemic has highlighted employee wellbeing and a seamless return to work as crucial corporate concerns.
The architecture of these workspaces will be heavily influenced by sustainability, with features like air purifiers, water recycling, and rainwater harvesting becoming requirements.
The pandemic did affect this segment at the onset and consequently, annual leasing share of operators fell to 7.9% in 2020. Weak market sentiment at that time led to withdrawal of expansion plans of many operators. However, with rising demand for managed office spaces since the last 4-5 quarters, operators and investors in the segment have regained confidence in the outlook of their businesses. Given the expansion plans of large operators, flex space leasing volume could likely continue on its upward growth trajectory in 2023.
Conclusion
Conclusively, the co-working sector is an idea whose time has come. Despite short-term challenges due to the coronavirus, the iksana.work industry is all set for double-digit growth in the year 2023.
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