Companies are calling their employees back to offices following a significant drop in COVID-19 cases. As occupiers and tenants return to offices, they continue to book co-working spaces. And the co-working industry is gearing up for another spell of growth, likely to be witnessed in the coming quarters.
Factors like expansion by co-working operators, improvement in service offerings, flexibility in lease conditions and formalities, management ease, and occupiers’ caution to reduce costs have led to increased activity.
Recent findings from Colliers, a professional services and investment management company, said flex space saw its share increasing to about 15 percent from 5 percent in Q1 2021. Large corporates continue to explore managed offices, and this has led flex spaces to open new centres in metro cities and even in non-metro cities, the findings said.
Experts have cited several reasons for the increased space take-up. “The demand for flexible workspaces is constantly increasing because such spaces provide companies with an option to save costs, increase productivity, augment the work experience, and provide flexibility. These players are curating unique experiences and engagements for building tenants by providing state-of-the-art amenities like gyms, cafés, creches and managing the complete building ecosystem by bringing alliances, events and community focus to the occupants,” said Arpit Mehrotra, Managing Director, Office Services (South India), Colliers.
Flex space operators continue to focus on customisation and provide on-demand workspaces, attracting small and large occupiers alike. “COVID-19 emerged as the chief designer of office spaces of the future. As the threat of the virus recedes due to acquired immunity, and the progressing vaccination drive, many offices have/are preparing to come back to normalcy, albeit in a new normal – the hybrid model,” said Anuj Puri, Chairman – ANAROCK Group. ANAROCK is the country’s leading real estate services company.
Interestingly, in this new work environment, co-working spaces have emerged as the best mode for adopting a hybrid model at offices, as per an ANAROCK-LinkedIn survey.
Co-working operators agree. Large corporates are requesting employees to come to work for 2-3 days a week on rotation basis. “This has created surplus space in their existing offices and they are moving to co-working or managed offices post expiration of their lock-in,” said Aditya Verma, Founder & CEO, The Office Pass(TOP).
“We continue to see an increase in demand for flex space as a result of the numerous benefits it offers employees and businesses. Whether it’s lower fixed costs, greater customisation options, flexibility to scale or simply access to a culture of community, collaboration and networking, our spaces enable organisations to ensure a smooth transition back to work,” said Karan Virwani, CEO, WeWork India.
Operators plan expansion
The trend is evident from the space-taking and expansion plans of operators. “At WeWork, we plan to expand our portfolio by a million square feet in 2022, with over 50 percent of the planned development already pre-committed by enterprises… Meeting the demands, we have leased more than 1.7 million square feet of office space to large enterprises and smaller firms in the past year and foresee this trend to continue,” added Virwani of WeWork India.
Another large player, Awfis, has transacted 30,000 seats in the last five months and “has crossed pre-pandemic seat sales,” said Amit Ramani, CEO and Founder, Awfis. In January 2022, Awfis reached the marquee 100-centre milestone and is optimistic about the growth of flex spaces in the country.
“In line with the same, Awfis aims to double its capacity in 2022 with 200 centres by continuing to expand in emerging Tier I cities like Lucknow, Nagpur, Bhubaneshwar, Kochi, and Jaipur, alongside metros. We are also soon crossing the 150 centres and 90,000 seats mark -- by end of April 2022,” added Ramani.
Other operators like Smartworks, IndiQube and Simpliwork are already looking to expand and are signing deals.
Occupiers have exercised caution while taking up traditional workspaces. “Occupiers have started asking their employees to be back in office in a phased manner. They are also opening their workspace in a hybrid manner — neither completely remote, nor completely work-from-office,” said Mehrotra of Colliers.
“Enterprise customers who were primarily fence-sitters pre-COVID-19, have come to realise the crucial role that co-working spaces play in providing flexibility and meeting their now evolved workspace needs. In fact, given the uncertainty of the times we live in companies do not want to bear the added cost of running multiple offices and are therefore opting for a decentralised model that cuts costs, and helps maintain business continuity, while enabling access to talent across the country, more efficiently,” added Ramani of Awfis.
As a result of the demand and expansion, there are indications that rental values are firming up across centres. Moreover, to meet the health and safety protocols, co-working operators are transforming by way of digitalisation. This includes the installation of automated attendance, voice-controlled features, sensor-activated disinfectants and digitalised ventilators, among others.
The momentum to continue
The momentum is likely to continue for the rest of the year. And operators and market experts are hopeful that the space taken will increase from these levels. The need for customisation and a hybrid working model will continue to have a direct impact on the absorption trends. Moreover, the concept of neighbourhood centres will gain popularity.
“The demand will be driven by new co-working centres that will open not only in the CBD area of the city but also around residential neighbourhoods (to cater to the work-near-home market),” added Verma of TOP.
“Going forward, we are likely to see developers of commercial office assets across the country align with such operators and carve out specialised spaces for them. The expansion plans of major players and the increasing appetite for this format from occupiers, property owners, and co-working operators would be fuelling the growth,” said Puri of ANAROCK.
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