“Coworking” refers to a style of working where individuals have access to each other’s critiques, opinion and ideas, even though they work independently. A coworking space is usually an open floor-format office with shared spaces for meetings, networking and collaboration and are set up to meet the on-demand needs of occupiers.
Coworking is fast gaining its popularity among start-ups and boutique firms today, given that coworking spaces offer flexibility without the need to tie up capital to a lease obligation. Although the concept is not new, what makes it exciting is the fact that coworking has witnessed tremendous growth across the globe around the past couple of years.
Reduced costs, no fixed capital investment and increased flexibility are the foremost reasons for the rising popularity of shared spaces. It is anticipated that by 2020, coworking space will overtake the traditional office format.
The report “Future of Work – The Coworking Revolution” is India’s very first co-authored study by Confederation of Indian Industry (CII), JLL India and WeWork on the booming coworking offices industry and was launched at the CII Realty and Infrastructure Conclave during July, 2017. The report investigates the trends and market forces driving the coworking space across India and the world.
Coworking Spaces in India
India is fast becoming a hub of coworking spaces. The key drivers of coworking spaces in India are predominantly, cost, infrastructure and networking opportunities.
Global firms like WeWork are expanding in India and are replicating the shared spaces model, already established in mature markets. The coworking segment in India is expected to receive US$400 million in investments by 2018.
Currently there are around 200 premium business centres across the country that are set to double by 2020. Although there are less than 100 branded coworking spaces operating in India, this number is expected to expand by four times over a period of three years. Aggregated shared offices are set to reach approximately 500 centres by 2020 from their status of about 150 centres. At present, there are approximately 300 (branded and unbranded/organized) shared workplace operators in India, operating almost 720 centres across urban India.
The potential market size for the coworking segment across India currently stands in the range of 12-16 million (Figure 1).
Figure 1: Potential Market Size for Coworking across India
Of this potential market size, the total addressable market size for shared spaces across the six major cities of Delhi NCR, Mumbai, Bangalore, Chennai, Hyderabad and Pune is approximately 5 million (Figure 2). Mumbai offers the highest business potential with over a million people, followed closely by the National Capital Region (NCR) with about another million in need for working spaces, followed by Bangalore, Chennai, Hyderabad and Pune. Demand for coworking spaces is highest in the cities of Mumbai, Delhi NCR and Bangalore.
Figure 2: Addressable Market Size for 6 Major Cities
Around 70% of the business opportunity lies with the large corporate firms, followed by the small, emerging business sector, generating around 20% of the market demand and the professional freelancers and start-ups form the rest of the market demand i.e. 10%.
The coworking industry is still in a nascent stage in the country. Several players are emerging in the market with over 90% of India’s shared workplace operators starting their first coworking space in the last 12 months. With India becoming the third largest start-up hub in the world and the second largest freelancer workforce in the world, there is a potential demand for more than 3.5 to 4 million seats in the coworking space.
Reasons to Consider Coworking
For the corporates and start-ups, coworking is more cost effective relative to traditional leasing arrangements. Further, tying up with operators at multiple locations through coworking saves time and enhances productivity, and also promotes knowledge sharing through collaboration with professionals from other fields. Coworking also helps in expanding teams as there are no restrictions on increasing the number of seats in a coworking facility.
The Coworking sector also presents a number of advantages for the developers, landlords and investors. Offering coworking spaces are more flexible and coworking spaces offers better pricing in terms of escalations and renegotiations every year and. Moreover, as the supply of such coworking facilities is low, occupancy can always be maintained and once established, such places become self-sufficient financially and therefore capital infusion on a regular basis is not required.
Technology, Millenials and the Future of Work
The future of the workplace is rapidly changing, primarily to meet the new demands in a market place driven by advanced technology. Improved technology is enabling access to remote areas of a city and distributing workforces. Working remotely from a variety of distant locations has been made possible through mobile technologies and personal devices while modern tech frills such as hi-speed Wi-Fi access and on demand IT solutions are facilitating virtual collaborations.
Another major reason for the changing workplace is the way millenials approach work. Millenials account for over half of the population in India. India is the youngest start-up nation in the world, where 72% of the founders are less than 35 years. On demand, flexible places are the preferred places for these millenials. Also, experts are of the opinion that millenials will have as many as four to five different careers in the course of their professional lives. Thus, retaining millennial talent would have to be an innovative mix of agile workshop design and alternative career choices that the organizations can offer within the same shared workplace.
With the changing landscape of the real estate market, a traditional approach to strategy, decision making and operations is no longer sufficient. The “Future of Work” model is based on the changing world of work and its impact on the next generation of corporate real estate. The model highlights five areas that companies should address to confront the challenges of the changing landscape of work which includes human experience, digital drive, continuous innovation, operational excellence and financial management. (Figure 3)
Figure 3: Decoding the Five Dimensions
Although the prospect of the coworking space looks bright over the next couple of years, there are some concerns regarding its sustainability in the future. For example, most buildings at present are able to accommodate only one coworking operator, due to exclusivity agreements. This significantly limits the growth potential and range of quality options that the coworking spaces can provide. Nevertheless, the sector is still at a nascent stage and the future prospects of coworking spaces looks bright. The emergence of the sector has led to fundamental changes in people’s attitudes towards traditional office spaces and it is important to understand the value that shared places can create in terms of retaining, motivating and enabling a workforce.