Co-working spaces are becoming a new asset class in commercial realty
It’s becoming hard to differentiate between an office and a café. Mumbai’s co-working spaces are a mix of work and play, with conference rooms, printers and wi-fi, but also the sweet aroma of coffee in the air, and areas for napping, showering and even indoor sports.
As these co-working spaces draw a steady mix of consultants, freelancers, entrepreneurs and small business owners, they are changing the way certain pockets of the commercial real-estate market work, in India’s commercial capital.
A report released by realty consultancy JLL recently found that the Mumbai Metropolitan Region (MMR) is second only to the techie hub of Bengaluru in the number of such spaces, with more than 2,500 seats within such facilities available.
It also predicts that, by the end of the year, about 40 new co-working spaces will have come up in MMR, with another 50 new facilities expected in 2017.
“These spaces are emerging as a new asset class that is resulting in new kinds of demands for office space,” says Ramesh Nair, COO for business and international director at realty consultancy JLL India. “It is quite possible that over time, in markets such as Mumbai, Delhi and Bangaluru, co-working spaces will begin to show up on commercial realty indexes as a separate category in terms of pricing and demand.”
That is a pretty significant change — given that these spaces started out as a quirky way for freelancers to get out of the house, network, and outsource some of the IT and maintenance functions. But co-working spaces do so much more.
Some, like Awfis, are even offering accounting, legal, recruitment and web management services to members — serving, in effect, as fullfledged office setups.
This willingness to adapt to the user’s needs is typical of the aggregator model that is changing landscapes around the world — in fields such as public transport and communication.
While maintaining an aura of professionalism, co-working spaces offer flexibility, convenience and technology at minimal cost; they allow users to network and benefit from their proximity and shared spaces.
“As the number of freelance professionals and small and medium enterprises grows, these have become integral needs,” says Nair. “Essentially, there are three things today’s urban citizens need — a sense of informal community (think Facebook, LinkedIn); excitement about sharing resources within these communities (think AirBNB, UberPool); and a willingness to trust new systems to maximise what they can get out of this shared infrastructure. Co-working spaces are a culmination — and a prime example — of all three.”
FLEXIBILITY IS KEY
At most co-working spaces, you can just walk in and get to work, paying a few hundred rupees a day. Or you can opt for weekly, monthly and annual membership plans.
At Ministry of New in Fort, for instance, you can rent a workspace on a part-time or a fulltime basis. While parttime memberships can cost anywhere between Rs 5,500 for 5 days a month, for a period of 10 days, you will have to pay Rs 9,500. A fulltime deal is unlimited and can cost Rs 19,500. This space is open six days a week from 9am to 9pm.
As more companies offer flexible working hours to millennial employees, fulltimers are driving up demand for these spaces. And some companies are even starting to use co-working spaces for branch operations.
E-commerce major Snapdeal, for instance, has booked an entire 90-seat floor at the Andheri West co-working space run by Awfis.
“It’s centrally located, provides good public transport connectivity to our team. It is also a well-managed facility, with extra amenities not available at our previous office location,” said a Snapdeal spokesperson.
Amid growing demand, Awfis itself has expanded. The 18-month-old venture currently has 12 operational centres and 2,500 seats across Mumbai, Delhi and Bengaluru, with a member base of more than 2,300.
“Business centres and coworking spaces have existed for over a decade but with a huge gap in amenities and cost when compared to those provided by conventional office spaces,” says Sumit Lakhani, chief marketing officer for Awfis. “With their open formats and advanced infrastructure, coworking spaces are now changing the game.”
At Awfis, the setup is informal and vibrant while the amenities include high-speed internet, video projectors, complimentary beverages and access to meeting rooms across India for members.
In cities like Mumbai, where space comes at a large premium and maintenance costs are high, co-working spaces are drawing startups and SMEs that need to scale up operations very quickly or spread out across cities at short notice. “Such spaces are a good answer to the affordable space question,” says Deep Kantawala, head of realty consultancy ICS Real Estate Partners. “Here, small enterprises can acquire space as needed and not invest in property in anticipation of future demand.”
Business nomads, expats and frequent travellers are another large demographic, adds Nair of JLL.
NOT ALL GOOD NEWS
There are a few things about coworking spaces that could affect their long-term growth. The atmosphere tends to be very informal and casual.
“This could affect productivity and see companies move back into spaces they can control better,” says Vikram Goel, chief executive officer at HDFC Realty. “It’s also harder to build a sense of identity and team in a space with such a high degree of inter-company mixing and flux.”