Monday, December 17, 2018
Follow us on
Business

Co-working demand set to triple in the next 3 years, says Knight Frank India

June 21, 2018 05:17 PM

Knight Frank India, one of the leading International Property Consultants today launched a report on the changing perceptions of the workplace titled Co-working: The office of the future.

 

Key findings of the report:

 

  • ·         Over the past decade especially, the role of the work environment in enhancing employee productivity has been acknowledged as office design, amenities and even colour have been observed to have a significant impact on the operational efficiency of the employee. Recent research has also shown that the introduction of natural elements such as fresh air, sunlight, greenery and even natural smells and sounds in a workplace play an important role in reducing the employee’s work stress and enhancing his creativity.

 

  • ·         India, today, is witnessing a proliferation of start-ups and SMEs, buoyed by the government’s concerted efforts to create a sustainable eco-system for entrepreneurs in the country. On their part, the entrepreneurs—a large number of them being millennials—believe in harbouring global aspirations with a staggeringly ambitious mind-set that was not in evidence a few years back. This provides a perfect platform for dynamic co-working business centres to cater to the office space needs of these aggressive growth-seeking start-ups.

 

  • ·         Due to the changing perceptions of the office, the workplace is now being looked at as an environment that needs to be managed and optimised. It is being viewed as an instrument that could drive a dynamic and vibrant culture of corporate productivity impacting the financial, cultural and environmental ethos of the organisation. This far reaching agenda warrants an element of specialisation. The co-working operator is filling this niche and is fast being regarded as a specialist in workplace management who can cultivate an environment of collaborative enterprise that yields tangible benefits to the occupier.

 

  • ·         The number of co-working spaces across the globe has grown by 3,050% (600 centres to 18,900 centres) since 2010 while the number of people working in these facilities has exploded by close to 8,000% by growing from 21,000 seats to 1.7 mn seats in the same period, according to Statista Dossier.

 

 

  • India is at the cusp of a co-working revolution with several large players spread across the country. There are close to 200 co-working players running an estimated 400 shared workspaces across the country today, compared to just Regus and few localised players in 2010 running less than 30 such centres.

 

  • While Regus is the most established and largest shared workspace operator in the country today with approximately 0.19 mn sq mt (2 mn sq ft) and 20,000 seats under operation, WeWork and CoWrks are among the newest and most aggressive players in the co-working space.

 

  • Private Equity players have also been looking to invest in co-working startups. One prominent example is that of Sequoia Capital that invested $ 20 million in mid-2017 in co-working space start-up, Awfis.

 

  • Despite the demand for co-working space, there are several challenges that have to be tackled; for instance – changing the conventional mindset of a client who would want to book a meeting room based on the touch and feel factor rather than an app. Data security and privacy are also impediments in the way of a corporate taking up co-working space especially as the value of data becomes a greater source of competitive advantage.

 

  • While co-working companies accounted for just under 0.17 mn sq. mt. (1.8 mn sq. ft.) of the 3.81 mn sq. mt. (41 mn sq. ft.) annual commercial office space transactions volume, the expansion plans of major players and the increasing appetite for this format from occupiers, property owners and co-working operators should see annual transaction numbers triple from current levels over the next 3 years.
    • 2017: 0.17 mn sq. mt. (1.8 mn sq. ft.)
    • Q1 2018: 0.19 mn sq. mt. (2.0 mn sq. ft.)

 

  • Currently, NCR, Mumbai and Bengaluru house most of the co-working stock in India followed by Pune and Kolkata.

 

  • In the early days, co-working used to be the domain of the quintessential start-up, SMEs and Gig economy (freelance) constituents that needed the flexibility of tenure as well as cost that a standard leased office space could not offer. However, the advantages of the co-working proposition have also brought it to the attention of the more established and mainstream occupier. Approximately 50% of the client roster of an Indian co-working operator is made up of big corporates. This can go as high as 80% in the more premium priced offerings.

 

  • Major 5 players namely Regus, WeWork, Cowrks, Awfis and Smartworks have 0.79 mn sq mt (8.5 mn sq ft) operational space; with plans for additional 0.65 mn sq mt (7.0 mn sq ft) by 2020.

 

  • While co-working companies took up a modest 0.17 mn sq mt (1.8 mn sq ft) in 2017, the first quarter of 2018 itself has exceeded the annual tally of 2017. Q1 2018 witnessed transactions to the tune of 0.19 mn sq mt (2.0 mn sq ft). In Q1 2018, the highest co-working transaction activity was witnessed in Bengaluru, NCR and Hyderabad markets, which contributed 43%, 16% and 15% respectively.

 

    • Co-working transaction share in Q1 2018

 

City

Share

Bengaluru

43%

NCR

16%

Hyderabad

15%

Pune

12%

Mumbai

10%

Ahmedabad

3%

Chennai

2%

Total

100%

 

 

Dr. Samantak Das, Chief Economist and National Director - Research, Knight Frank India, said “Due to the changing perceptions of the office, the workplace is being viewed as an instrument that could drive a dynamic and vibrant culture of corporate productivity impacting the financial, cultural and environmental ethos of the organisation. This far reaching agenda warrants an element of specialisation. The co-working operator is filling this niche and is fast being regarded as a specialist in workplace management who can cultivate an environment of collaborative enterprise that yields tangible benefits to the occupier.

The fact that large Indian corporates today constitute approximately 50% of the co-working operator’s overall client roster bears testament to its increasingly widespread acceptance among mainstream occupiers. While co-working companies took up a modest 0.17 mn sq mt (1.8 mn sq ft) in 2017, the first quarter of 2018 itself has exceeded the annual tally of 2017 at (0.19 mn sq mt) 2 mn sq ft. The expansion plans of major players and the increasing appetite for this format from occupiers, property owners and co-working operators should see annual transaction numbers triple from current levels over the next 3 years.”

 

Adds Viral Desai, National Director – Occupier Solutions Group, Knight Frank India, “From being on the fringes as a short-term solution, co-working is now being considered as a real estate solution. Flexibility to scale up and down, ease of transaction in terms of a single cheque, no hassle of fit outs or dealing with multiple vendors and reduced legal and compliance risk are some of the factors that have paved the way for co-working. Commercial Real Estate has to transition from a product to a service with a higher level of customer service and co-working operators are making this transition happen.

Although there is a lot of discussion on whether co-working will replace traditional office spaces, it is important to note that a co-working space is complimentary and not conflicting to the traditional office space and that both will co-exist. Also going forward, we will see occupiers using a mix of both flexible and traditional space. Having said that, there are two major challenges that co-working operators will face, one is that they are buying long and selling short hence the financial risk and the second is not meeting customer expectation thus leading to erosion of value associated with a negative or declining customer experience.”

 

Have something to say? Post your comment
More Business News
Meet a farmer turned author who is writing on agri terrifying crisis in his small village in Solapur's Barshi taluka
चीनी मिलों ने चालू गन्ना पिराई मौसम के दौरान अब तक 48.10 लाख क्विंटल गन्ने की पिराई करके 3.72 लाख क्विंटल चीनी का उत्पादन किया
56 present of millennials willing to consider Co-living spaces in top cities: Knight Frank India survey
Gurugram potential as realty investment rises with SPR
Online Firms Are Now Selling Meat And a New Perception पूर्व वित्‍त सचिव शक्तिकांत दास बने आरबीआई के नए गवर्नर पीएम मोदी और वित्‍त मंत्री की हुई मुलाकात, RBI के नए गवर्नर का आज एलान संभव रिजर्व बैंक के मुद्दे पर पीएम मोदी ने वित्‍त मंत्री अरुण जेटली से की मुलाकात चुनावी नतीजों के बीच गिरकर संभला बाजार, सेंसेक्स में 230 अंकों की रिकवरी Election Results: चुनावी नतीजों के बीच सेंसेक्‍स में 500 अंकों की गिरावट