by Shefali Gautam
Today, where almost all the sectors are experiencing a change, real estate is no more left behind. From housing demands to infra culture to shift in commercial spaces, the realty market has seen a holistic transformation in the past few years. Co-working space is the new catchword in the realty market. It is one of the fastest growing spaces in the commercial real estate segment. The exploding start-ups firstly created the demand for co-working spaces but now big corporations and Multi-Nationals are also stepping out of their conventional office set-ups, triggering the growth further.
Considering the recent changes in the commercial space, arguably the most fascinating one is the emergence of co-working spaces. The arrival of co-working spaces has changed the conventional leasing method, with occupiers adapting to both flexible office space and fixed office concepts for core operations. There has been a dynamic rise in space taken up by co-working companies and this has affected rental rates as well.
The number of co-working spaces worldwide is estimated to cross 20,000 soon and reach 25,968 by 2022, an increase of 42% from 2019. This would also mean that there has been an average increase of 2,595 new spaces every year since 2015. The global market value of flexible workspaces is estimated at an approximate $26 billion. These stats clearly illustrate how co-working space has become the workplace of choice.
Talking about the growth of flexible workspaces in India, the potential market size for the co-working segment across the nation currently stands in the range of 12-16 million and occupancy levels have been nearing 100% for the few institutionalized co-working operators in India. The market for co-working spaces folded double in 2017 while the growth sustained in 2018 and is expected to continue in 2019 too. This is all because of the ease of doing business that a co-working space offers. This is driving the burgeoning start-ups to cut their investments and focus more on their key areas. Flexible workspaces are acting as a boon for start-ups as they just have to step in and start their business as co-working space offer the entire set-up required for operations. These spaces provide modern amenities such as superfast WiFi, conference rooms, snack bar, game zone, etc.
The past few years have seen an incessant growth in demand for flexible workspaces and seeing this the developers are now coming with different spaces as the solution. If you go back like two years ago, owners/developers were hesitant at giving space to a co-working operator, but things today have changed for good and now they are looking at a co-working space as a cash cow. This paradigm shift in the working culture and developers’ approach towards co-working spaces is expected to bridge the gap between the rising demand and the required supply.
Undeniably, with the co-working spaces, companies can now find a plug & play flexible workspace at a different location(s) as per their convenience and can offer flexibility to their employees too. Another important factor for the rise of co-working spaces in India is the rise of globalization and the emergence of overseas MNCs in the Indian market. Every company wants to cut short their expenses and what’s better than having a co-working space which offers a completely furnished office space with optimum infrastructure. The co-working spaces offering MNCs to a large extent to park their services In India.
According to Colliers International, co-working spaces in India are growing at a rapid pace, with flexi operators leasing the highest ever in 2018. Leasing by flexi workplace operators crossed 7 million square feet during 2018, accounting for 14% of the total leasing during the year. Bengaluru topped the list for the highest share of leasing by flexi operators, followed by Mumbai and Delhi-NCR.
Seeing the upward growth, we can easily say that co-working space is here for long. The work culture is evolving and so as the need of the employees. The next destination for the flexi workspaces would be Hyderabad, Chennai, and Pune where one can already see the expansion. Also, the industry has voyaged successfully to tier II cities in the past couple of years, and we believe this trend will continue in 2019. According to CBRE, in 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.