Are co-working spaces here to stay?

The community work office as an idea has gained traction in the last two years

It was 2017 and I was still attempting to learn the ropes of being an independent writer and photographer. The idea of working from home amidst the incessant doorbells, familial interruptions and procrastination tactics were challenging to navigate through, at a time when #WFH wasn’t a popular hashtag or acronym yet.

While trying to maintain a writing schedule one afternoon, I received an email from WeWork, “a commercial real estate company that provided flexible shared workspaces for start-ups and services for other enterprises.” Founded in 2010—with their first branch established in New York City—the co-working space provider was unveiling their second community workspace in India, in Mumbai’s Bandra-Kurla Complex (BKC). The news was accompanied by an invitation to participate in a month-long incubator programme for creative professionals, presumably as a trial to gauge the market and create a buzz about the fairly new phenomenon of a flexible working environment.

Cut to the Covid-19-pandemic era: WeWork Global lost $2.1 billion in the first quarter of FY21, and dissolved 100 of its underperforming centres due to the overwhelming effects of the coronavirus. These happenings, followed by a settlement with the ousted co-founder Adam Neumann, have been dramatised in the television series WeCrashed (2022), starring Jared Leto and Anne Hathway.

How to make ‘co-work’ work?

The success of a co-working space depends on many factors. Leasing out property or running it on a revenue-sharing basis with the landlord is one such factor. The better the occupancy at the location, the less time it takes to break even. WeWork India seems to be a better spot. According to a Forbes India report, its CEO Karan Virwani is quoted as saying that with 10,000 desks and more than seven lakh sq ft of area rented out, the FY21Q1 quarter was one of their most successful ones. “It shows the growing influence and acceptance of flexible workspaces in the country,” he stated.

According to the same report, until March 2020, WeWork India was present in 35 locations, providing 60,000 desks across six cities. Virwani said, “In June 2020, we received $100 million in a fresh round of funding from WeWork Global, reinforcing the confidence and potential that they see in the flexible workspace category in India.”

Multiple players, similar strategy

With companies such as Discovery, Netflix, Pfizer, Zoom and Samsung, among others, opting for a co-working environment, it seems like the flexible model is gradually making its mark as a permanent feature in commercial real estate. “Companies are now looking at flexible workspace options with shorter lock-ins and zero capex investment, and are wary of any long-term rental commitments,” explains Rishi Das, co-founder of IndiQube, which has 50 properties across six cities and more than 70,000 desks. Due to the pandemic, a large population of employees had migrated to their hometowns, and often found it impossible to work from home due to space constraints. Das is hopeful that the company’s pay-as-you-go model will benefit conglomerates, since IndiQube plans to expand to Tier-II and Tier-III cities as well. “From a time when employees migrated towards work, we are now moving towards work migrating to where the employee is,” he says optimistically.

According to real estate company ANAROCK, as of 2021, approximately 35 million sq ft of flexible office stock is available across India. Out of this, approximately 3.7 lakh flexi-seats are currently spread across the major Tier-I and Tier-II cities. “Flexible workspaces are the preferred way to adopt the hybrid work model in a post-pandemic world, compared to options like changing existing office layouts or the hub-and-spoke model [in which companies retain their headquarters but work from multiple set-ups],” says Anuj Puri, Chairman of the ANAROCK Group in an email interview.

According to Puri, such flexibility, among other factors, will potentially double the market size of co-working spaces over the next five years at a CAGR of 15 per cent. “Companies that are returning to office environments are considering leveraging flexi-spaces to reduce their cost and expenditure, thus boosting the demand for this model,” he elaborates.

Flexi-space and rates

Market sources say that WeWork’s rental of the entire 16-storey ENAM Sambhav building in BKC on lease was for a whopping monthly rental of ₹4.3 crore, when it launched in 2017. The rates might have been negotiated in more recent times. So what are the rates for renting a co-working space today? At WeWork, it’s a steep ₹40,000 per seat, per month for an entire office space/floor which includes the use of meeting rooms and conference rooms, access to the pantry and maintenance charges. At Awfis, New Delhi, a private desk space can cost anything between₹.13,000-Rs. 15,000 with access to a pantry. Rates obviously differ from city to city.

Commercial real estate rates range from ₹77 per sq ft in Bengaluru, ₹60 per sq ft in Chennai, ₹57 per sq ft in Hyderabad, to ₹78 in Delhi-NCR and ₹125 per sq ft in the Mumbai Metropolitan Region (all figures are for 2021). With these rates,the way to make a profit is clear if factors like location, accessibility through public transport, seating capacity of the space as per its size, and expenses incurred to renovate the distance between the co-workers’ residence and ‘the temporary office’ are kept in mind. Analysts say a co-working space can take anything between three months to a year to break even, depending upon these factors.

For Mumbai-based therapist Shrimoli Sen, just starting out her practice, the flexibility of renting a cabin on an hourly basis at Awfis BKC for ₹800 seems much more feasible than renting out a permanent space in Mumbai, which is known for its astronomical real estate prices. “Since I am still establishing myself and building a client base, this gives me the flexibility to book a private space as and when I have an appointment. People are tired of the distance that therapy sessions on Zoom bring. During this unpredictable time, co-working spaces are a boon for independent practitioners like myself,” shares Sen.

While independent offices mostly bring together like-minded employees, flexible spaces also allow the intermingling of individuals from various professions, backgrounds and interests. I recall networking with an employee from Twitter, and an editor of The Goya Journal—a food and culture publication—at the same table, during my month at WeWork. It is a thought that resonates with Robin Chhabra, founder and CEO of Dextrus, which offers a total of 560 seats at BKC and Lower Parel, Mumbai. Chhabra believes that the shared workspace might heighten a sense of camaraderie amongst potential competitors, in the same work environment.

Chhabra is very bullish about the success of a co-working environment. Currently, the brand sees a great mix of MNCs, Indian conglomerates, foreign liaison offices, freelancers and SMEs using their services. “We have seen very optimistic tides post the second lockdown, as the launch of the second centre saw 100 per cent of the built inventory lease within three months. We are keen to expand within the city and look to grow a centre a year, over the next three-four years,” he adds. Dextrus, too, offers a pay-as-you-go option for clients who might not be able to commit to long-term leases.

Hybrid is here to stay

A survey conducted by ANAROCK with LinkedIn in 2021 explored the rise in the hybrid work model as the future of Indian offices. As many as 46 per cent survey respondents voted in its favour, followed by 30 per cent who voted for the hub-and-spoke model, while 24 per cent favoured changes in the existing office layouts. “Going forward, we are likely to see the 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 will fuel their growth,” explains Puri.

According to a May 2020 study by real estate company Jones Lang LaSalle, compared to a handful of players in 2010, today there are more than 300 flexible space operators in India. Enterprises comprise nearly 50 per cent of the demand in most markets. While memberships are the key factor in creating revenue for these spaces, rentals by restaurants, gyms and bars that operate within the premises also play a role in creating profits. It’s an idea that private-member clubs such as Soho House, Jolies and Quorum in Mumbai are also investing in.

As our ideas of working environments, routines, schedules, accessibility and, most of all, convenience, have altered significantly, the popularity of the co-working space is rising. After all, flexibility seems to be the only thing that’s permanent.

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