Founded in April 2016, Smartworks focuses on enterprises rather than startups or SMEs. It currently has a footprint of more than 2.5 million sq ft across 23 locations and is looking to raise $30 million.
Edited excerpts from an interview:
Q. What is the total footprint of the company and any plans for expansion?
A. We are a three-year-old co-working player based out of Gurugram and have now expanded to nine cities. We are present in Delhi, Gurugram, Noida, Mumbai, Pune, Hyderabad, Chennai, Bengaluru and Kolkata and essentially cover close to 2.5 million sq ft across these geographies. SmartWorks is an office experience company which is into managing office spaces. We take up individual buildings that are about 300,000 sq ft and focus on the common areas first - meeting rooms, conference rooms, and all common facilities one may require in an office space such as gyms, crèches and even sports facilities such as cricket, badminton, basketball. Most co-working players cater to start-ups, SMEs, companies looking for 10-20 seats for short term requirements. We do not cater to that demand. We cater to enterprise clients and work towards getting them to move their headquarters into serviced office spaces. Out of 300 clients, almost 95 percent are enterprises.
The average space take-up by each of our clients is about 280 seats spread across about 10,000 sq ft.
Also, most corporate houses are unable to replicate the campus-like experience in the regional facilities. We try and create a campus environment with multiple tenants and give them a custom-made experience for their offices. We focus on long-term deals spanning for almost three years.
In Delhi-NCR, we cover approximately 350,000 sq ft to 400,000 sq ft and are looking at doubling that number by the end of the year. Our current footprint stands at about 2.5 million sq ft and we plan taking it up to 4 million sq ft by the end of this year. The business has already seen an investment of close to about $25 million so far, all self- funded by promoters. We are in the midst of fund raising right now. For us to get to 18 million sq ft within five years, there will have to be significant amount of investment. At this point of time, we are looking at raising close to about 30 million dollars.
Q. Any new trends for 2019?
A. One of the trend that is picking up is to do with mixed-use facilities coming into co-working. We have looked at malls that are strategically located but not doing well. We are seeing that kind of supply coming in as co-working spaces in areas such as Pune and Mumbai. Such inventories are expected to change the industry. There is also going to be consolidation in the co-working segment in the next eight months. There are 400 players today but only five to six players today who command 80 per cent of the market.
We have not looked into stadiums yet but are open to it. We have converted a warehouse in Chennai into a co-working space and received a commercial license for the warehouse. Going forward, 10 to 15 percent of our new supply would be in other varied asset classes such as malls, warehouses, or even institutions that are in the right location.
Q. Is co-working segment expected to get a fillip with the introduction of REITs in the country?
A. REITS are a healthy exit option for co-working spaces as well. Essentially when we started out we were looking at strategic acquisitions. It is definitely a path going forward. REITs is still very young in India. There need to be a couple of other REITs first before co-working can be shown as an option but it can be looked at in the next two to three years.
Q. What are the cost savings for companies opting for co-working spaces?
A. Nowadays, businesses need to either scale up very quickly or scale down rapidly. For this they require flexibility. Gone are the days when you needed six to 10 years to scale up and grow at a certain pace. Today, companies with 100 people can go up to 1000 in a matter of months and go back to a 100 people in a matter of months. You require a flexibility where real estate is no longer a cost head, it is not a fixed cost but may be a variable cost. I think a lot more companies have started adopting real estate as an operating cost rather than an investment. The other saving is in terms of scale. Since you are sharing certain parts of the office that you are not using on a regular basis, you are able to derive better efficiencies from real estate. The cost savings are almost 30- 50 percent.
Q. What are the company's plans for tier-2 towns?A. As we look at touching 18 million sq ft, around 17 million sq ft is going to be in nine cities where we already have a presence. Only 1 million sq ft would be located in tier-2 cities. We are tracking Surat, Ahmedabad, Chandigarh, Jaipur, Bhubaneswar, Coimbatore and Madurai to start with. We would be present in these cities by the end of the year but this will only be about 4-5 percent of our inventory.