As companies increasingly incorporate the hybrid working model into their operational strategies, the demand for the services offered by coworking companies has exploded. Coworking companies that typically specialize in managing flexible workspaces say much of the growth is being driven by the IT/ITeS and BFSI (banking, financial services and insurance) sectors.
“We expect this trend to continue. The pandemic has created a desire for lightweight asset models that allow for adaptability. Since the lockdown, we have seen a 10% increase in our business portfolio, bringing the total to over 60% member businesses across India,” said Karan Virwani, CEO of WeWork India.
Unlike in the past where large corporations typically had a consolidated office in a particular location, companies are now looking to establish a distributed work model where the idea is to set up four to five office spaces in a specific city. Such a model helps access talent and support business continuity during bottlenecks that are largely localized in nature, says Neetish Sarda, founder of Smartworks.
“Companies don’t want to bear the hassle of managing multiple offices and that’s why they sign up for coworking spaces,” Sarda said. For Smartworks, the IT sector constitutes approximately 55% of its clientele. Sarda says the IT industry also covers up to 60% of India’s property portfolio.
Opting for coworking spaces, some of which have hubs in non-subways, also allows companies to provide a work setup for employees who have migrated to their hometowns amid the pandemic. Nearly 60% of the workforce in the top seven cities have returned to their home countries and potentially 10% of them will never return to their original job post, estimates Amit Ramani, Founder and CEO of Awis.
“Even in central locations, wherever companies have the option of ending their conventional rental leases, they are doing so and setting up managed offices with the help of coworking companies,” says Ramani. Lock-in periods for conventional office rentals typically range between five and six years, but coworking companies offer lower lock-in periods ranging from 24 to 60 months, Ramani says.
“The coworking industry is a way forward as many companies seek flexibility in land and building investments, rental payments, and proximity to workspace for employees,” says Gauravpreet Sethi, Sales Manager at 91springboard.
With the explosion in demand, coworking players are aligning expansion plans. Smartworks is already venturing into Tier 2 cities; the company will be commissioned in Coimbatore, Kochi, Jaipur and Ahmedabad in the coming months. “We went from about 2.8 to 3 million square feet. pre-Covid at approximately 5.4 million square feet. The goal is to reach approximately 20 million square feet. in the next three years,” says Sarda. Awfis will add 100 new centers this year, of which around 40 will go live in the next 90 to 100 days. The expansion will expand its number of seats to around 120,000 from the current 62,000 and cover new cities like Indore, Kochi, Nagpur and Lucknow. 91springboard has signed 3,000 new customers since the pandemic began and plans to double its existing capacity over the next two years to meet growing demand. WeWork says it last year leased more than 1.7 million square feet of office space to companies large and small, including Tata Sky Broadband, Colliers India and global technology company 3M.
ABL Workspace, which until now operated mainly from Delhi-NCR with 2,500 seats, is now aiming to add 15,000 seats across the country by March 2023. Mumbai, Pune, Bengaluru and Hyderabad are some of the main markets it is considering. Additionally, the company wants to make a foray into tier two and three cities as tech companies have begun to reserve space in smaller cities to cut costs. “Coworking will be a good solution for such budgetary problems,” its founder and CEO Akshita Gupta told Fortune India. It has also just closed a deal with Kotak Mahindra Bank.
For Awfis, large companies now contribute nearly 50% to its activity compared to 25 to 30% previously. ABL Workspace has grown by around 30-40%. “Corporate customers who were fence keepers before Covid have arrived in large numbers,” says Ramani.
In an interaction with Fortune India earlier this week, CP Gurnani, CEO of Tech Mahindra, said the company expects to utilize less than 50% of the company’s office space in the coming months. “With flexible working that allows working from anywhere, my employees now have the choice of coming to the office or choosing their preferred workplace,” says Gurnani.