How coworking spaces have become a hot property for office real estate sector

By offering better design, flexible lease terms, as well as lower deposit requirements, today shared workspaces are preferred not just by startups, but by large enterprises and SMEs as well.

How coworking spaces have become a hot property for office real estate sector

Tuesday April 23, 2019,

5 min Read

The coworking industry is the talk of the real estate town these days. Everyone is wondering whether it is here to stay or just a fad. JLL’s Emerging Trends Report indicates that the total amount of space taken up by coworking space providers in seven major cities has tripled from 1.1 million sq ft. to 3.4 million sq ft. over a period of one year. This only looks to go one way and that is up. What accounts for this unprecedented boom? There are a few reasons that has led to the emerging of a whole new segment in the commercial real estate market.

Increased demand agility

Overall, the commercial real estate sector has consistently grown, and the demand in India continues to boom. The setting up of Real Estate Regulatory Authority (RERA), the soon to be launched first Real Estate Investment Trust (REIT) of India, surge in new company set up, and increased FDI inflows are precursors to the consistent growth we are about to see in this part of real estate.

The supply side of things also looks good with the stock of Indian Grade A commercial properties set to increase over 30 percent in the next three years to about 700 million sq ft. All of this also means that the corporate real estate market needs to be nimble to meet this demand.

Traditionally, the market has favoured the large-to-medium footprints of companies. This made the industry less agile to changing market and demographic forces. But with the introduction of the shared workspace model, office real estate is getting the agility it lacked. Now, companies have the option of having office spaces of varying sizes in well-connected areas of the city. They can expand and contract operations quickly, and give a range of options to their workforce, where working on the move is now an important factor in resource planning.

Cost savings

Another advantage that is aiding companies in choosing coworking office spaces are the flexible lease terms and lower deposit requirements. This helps companies in their cash flow scenarios, and a survey conducted by CBRE indicates that 45 percent of companies choose coworking spaces due to cost reduction. Commonly accessed spaces such as meeting rooms, pantry, cafeterias, bathrooms, and corridors end up being more efficiently used. Companies can choose their meeting room requirements as and when needed and accordingly pay for them, and this helps streamline costs as well.

Coworking spaces are slicing and dicing the real estate to this smallest scale, and sharing every aspect across multiple users ultimately helps the end user immensely.

Demand across the field

There is a notion that coworking spaces are just for startups and freelancers, but that is increasingly not the case. The largest demand opportunity of over 40 percent lies in the large enterprises segment followed by the SMEs, where the demand opportunity is another 40 percent, and the startup demand completes the rest. Since there is something for everybody, the coworking segment further entrenches itself into the real estate market.

Rethinking design

The design of the office space is now a necessity in any company. Creating an environment where the workforce is content is essential to help maintain focus and enhance an effective working culture. Coworking spaces have used design to their advantage, which in turn is a great attractive quality to any company. A ready-to-use space that people enjoy coming to everyday is a no brainer.

Coworking spaces provide a range of services to their members, and one of them is the introduction of wellness and a health conscience into the overall product, which acts as a great plus to their members. Services such as these and many more in the end helps with talent retention as more and more of the workforce is turning to millennials who are demanding a changed lifestyle at work.

Lets not forget the landlord

The last and most important reason is the least talked about. Landlords and developers are realising the potential of coworking spaces, and are, as a result, offering favourable lease terms. Good coworking spaces look after the place by providing good maintenance to the property and that improves its longevity. Respected brands bring with them their name, marketing prowess and that brings eyes to the property and increases property values. More and more coworking spaces are entering retail malls, airports and into those unused parts of the property, which is helping their attractiveness as a proposition to all developers.  

Currently, about 10 percent of the offices in India are occupied by the coworking sector, which puts it at approximately to be the third-largest after IT/ ITES and manufacturing sectors.

That is saying something, especially since three years ago it was not even on the charts. The segment of coworking has now long been created, and its agility to evolve itself to have advantages to both the supply side and demand side of the market puts the sky as the only limit.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)