COVID-19 impact: Top eight co-working players to add nearly 7-8 mn sq ft space within a year

While demand for co-working spaces has grown during COVID-19 with the top eight players planning to add close 7 to 8 million sq ft in just about a year, co-living has been temporarily impacted by the pandemic largely due to work-from-home policies, experts said at a webinar organised by Naredco on Co-Working and Co-Living, Reimagined for growth in the post-pandemic world.

The co-working industry has done well. Absorption for co-working spaces touched 4 million sq ft last year and projects by the top eight players in India indicate that they are looking at 7-8 mn sq ft of space being added by the industry in just one year, said Anshul Jain, Managing Director, India and SouthEast Asia, Cushman & Wakefield.

“The industry has grown rapidly from just about zero percent in 2015 to 26 mn among the top eight players today. It may touch close to 35-40 mn sq ft in the next few years which is almost 8% of India’s grade A office supply,” he said.

Jain said that co-working spaces offer smart business solutions to enterprises in the form of flexibility, capex savings, and new-age design that seeks to promote the organisational culture and a collaborative work environment.

"I am very bullish about both the sectors. The next five years belong to these two sectors and from a development community a big focus on how to capitalise on these sectors would be very interesting," he said.

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Before COVID-19, most companies were looking at co-working in a structured way but the pandemic disturbed ‘all these concepts’ as the companies were themselves not sure what the future had in store, said Naredco president Niranjan Hiranandani.

The hub and spoke model could be flagged off as a major model in the next couple of years. “Co-working is here to stay and will continue to grow,” he said.

Hiranandani said the co-working segment would witness major growth, if the IT industry, which mainly prefers its own office campuses, would have taken towards flexible workspaces.

IT industry had also appeared to follow the same trajectory but they did not scale up in that direction. They still follow the old model of having their own office. “If IT were to get into it, you would have a new paradigm in place.”

He said student housing, as part of the co-living segment, is going to be very big in the next couple of years. "Educational institutions are not going to build hostel accommodations in a big way," he said.

As far as co-living is concerned, the concept did not pick to the extent it should due to the pandemic, experts said at the webinar.

“Our belief is that once vaccination is in place and social distancing concerns are reduced, the return to office will be a big driver of co-living,” said Jain.

Co-living occupancy in the US has touched pre-pandemic levels and the same trend may be seen in India once employees return to offices.

As far as residential real estate is concerned, the apartment sector in the US and Japan is witnessing interest in ownership of blocks of apartments and leasing. The emphasis is on single ownership. “That is a pretty strong phenomenon – institutional money will start getting invested in owning blocks from a leasing perspective and co-living will start getting integrated with normal leasing as interest rates comes down. Rental yields too will increase,” Jain said.

COVID-19 has created several opportunities for shared spaces in terms of co-working and co-living as an emerging asset class for futuristic growth in the real estate sector. “While co-living is a few years behind where co-working is, an explosion in both the segments is expected in the next five years. The next five years belong to these two segments,” he said.

Others who spoke at the webinar included Shriram Chitturi, CEO (Chief Executive Officer), Guesture; Pradeep Srinivas, Director- Private Equity, Investcorp; Nikhil Sikri, Co-founder and CEO, Zolostays; Krishnaswamy Nagarajan, Chief Operating Officer, Table Space Technologies; Arvindh Prakash Ayyaswamy, Sr. Real Estate and Facilities Portfolio Manager, Microsoft; Rajesh Arora, Member Finance, NAREDCO; Saurabh Shatdal, Managing Director, Capital Markets, Cushman & Wakefield; and Rajesh Goel, Director General, NAREDCO.