How Co-working spaces are boosting realty?

November 29, 2018


India is intrinsically working on it’s entrepreneurs.

Recently, India jumped 23 slots in the world ranking of  ease-of-doing-business, which is a clear consequence of the booming start-up culture that India is witnessing.

While many of these offices are yet to own their own commercial real estate, they’re thriving off the latest trend in commercial sector – Co-working spaces.

Co-working spaces house a number of small businesses, companies and startups under one roof, that fulfills most of their professional needs. If you walk into one of these places, you may come across a team of five members working with 5 seats and 2 desks, with another team working just a few feet away from them.

This concept allows startups to have an actual vibrantly decorated office for a monthly fees, which flexibly accommodates varying needs. In India’s sprawling startup scene, the concept seems to be doing really well.    

Co-working Real Estate – Current Scenario

India currently has about 600 co-working spaces spread across all major cities with Bengaluru, Delhi and Mumbai having the biggest share.

Over the past few years, the popularity of co-working spaces has increased immensely primarily due to the sprout in the number of startups in India.

There are about 180,000 seats in India’s coworking real estate, which is growing at a breakneck pace. For instance, the size of total real estate in 2017 measured around 1.8 million square feet, whereas only the Q1 of 2018 registered a 2 million square feet in total.

Benefits of Coworking Spaces

Coworking spaces offer a number of benefits to the startups as they take away the primary obstacle of paying for a full-built office. Startups can utilize as much as they need and still get a modern workspace to work at.

Here are some other reasons for which a startup would like to work at a coworking space.

No Bigger Upfront Costs

It’s naturally easier for a business who is just taking off to get an office without investing lakhs at one go. Most coworking spaces don’t demand for lakhs in investment but just a monthly fees of using the designated corner of the office, which is lesser than a leased office at a prime location in Mumbai.

When it comes to extracting the full value for the money, startups can’t ask for more. We’ll use 3 desks and 6 seats with Wifi, let’s lock it at 30,000 per month in the downtown of the city for 8 hours a day. Electricity, cleaning and reception area included.

It’s more than profitable than renting a shack somewhere in the suburbs for the same price minus every amenity offered at this price.

Minimum Leasing Hassles

If we compare shared spaces with a regular leased commercial office property, the hassles of leasing are pretty low.

There are no legal tenders required to take a coworking place for lease or on contract and you just pay the fees as per your requirements. You don’t have to take care of maintenance and you can use the place 24X7 which is a great option for homegrown startups.

Some coworking providers may ask for a 10 month security deposit but even then, it’s not an investment that you have to make. The day your job is done, you can move ahead to a new place without a worry.  

Vibrant Work Environment

The modern lot of coworking spaces are in sync with the modern office needs. They use vibrant furnishing, interior decor and enough space to breathe for everyone.

All the business essentials such as fast Wifi, coffee makers, front desk reception are also taken care of by the provider, which otherwise are your headache.

Moreover, a dynamic environment where everyone is hustling to get big goes a long way in boosting your enthusiasm about your own work, rather than a isolated cubicle in a jam packed ten story tower.

Wide Range of Options

It’s not like that a coworking space is limited to a given number of chairs and tables. You can choose the more premium cabinets which possibly include sky gardens and pool tables for the extra buck.

Alternatively, you can settle for a smaller arrangement as you begin and then expand as you get more members on the team. Most other independently leased offices won’t give you this freedom.  

Side Perk

Coworking spaces also offer a number of side perks such as networking opportunities and reserved parking space. As the competition increases, more new innovative features will be added to the current crop of coworking spaces.

A few of them offer guest access to additional team members and in-house pantry for the members at times. These perks are can’t be nearly as expected from an office leased independently.

What do you need to set up a Coworking space?

Looking at how things stand, there is a lot of promise in this sector for growth and an ever increasing demand for remote offices. Hence, delving into the coworking market to set up an office of your own isn’t a bad idea either.

Many new coworking startups are working as providers between the leasing businesses and the real estate owners, which allows them to operate without actually buying the place.

A lot of coworking spaces exist in the major localities of the metropolitans and it’s hard to compensate such locations without investing millions at a go.

Therefore, coworking startups serve everything that makes a piece of commercial property come alive for the prospecting businesses. Here are a few things that you would have to keep in mind, if you want to set up your own coworking space business.  

Find a Great Office Floor or Building

As states, you don’t have to buy a whole building to start up. You can do very well by leasing a whole floor or a small building from the property owner.

Given the profitability of the market which has raised about $68 million in the recent three years, property owners would want to give off their office space for setting up a coworking hub.   

The hunt is much more difficult than it sounds because bigger and better locations are often reserved for Multinationals who’d have a strong backing to pay for the lease.

Therefore, professional commercial real estate advisors will be required in your case who could set you up with the prospects in your city and get the ball rolling.

Getting the Office Space Ready

Once you have your hands on a great office floor, you can begin with the interior setup. Depending upon how well the property is prefabricated to be an office, you’ll have to make the additions.

Some properties already have a good carpet flooring, the Air Conditioning figured out and security system in place, which’ll save you some costs.

Outline of the things you’ll need to integrate

  • A Refreshing interior design
  • Plumbing and Electrical Fittings
  • Internet Wiring
  • Furnishing – Chairs, Desks, and bean bags

The costs associated with these things would mainly depend upon your business model. There are all kinds of coworking spaces that offer various amenities, while some just offer a nice place to sit in.

Depending upon the business environment, some coworking spaces could be as simple as a coffee shop with chairs tables and a small pantry, while some could be comparable to a 3 star hotel, including space for events, and board meeting rooms.

Operating the Coworking Space

After the infrastructural setup, you’ll need the things that keep the office going.

  • Staff – You’ll need to hire a team of security guards, stewards, housekeeping professionals and managers who’d make sure that the space runs as expected. You can share these responsibilities among your own team as far as conditions allow.
  • Software – Managing the bookings, collecting fees and alloting office space without a software would be hard to imagine. Therefore, significant thought needs to go in getting software ready for the coworking space.
  • Sales and Marketing – Marketing is an active process and a pivotal one when we talk of real estate businesses. No matter how jam packed your office space is, it’ll need the support of new customers constantly flowing in, to keep it running.

Are Coworking Spaces Profitable?

The current trends are pretty promising if we look at India’s market for coworking spaces.

WeWork which is one of the largest coworking providers in India has grown up to a capacity of 12,000 members across its various ventures in India. The company evaluates around $45 billion globally with more funding flowing in.

Similarly, Workafella, which has grown out of Chennai is another prominent example of a proliferating startup, have spread its wings in 5 of the major metropolitans of India.

Same goes for 91Springboard, which now has 21 centers in 9 of the cities in India and is currently banking on the large number of corporate events, it hosts.

The key factors in making a coworking space successful as revealed by the owners of these startups can be briefly summarized as follows.

  • Unique propositions that no one else offers to attract clients.
  • Lucrative styling that breathes freshness into the visitors as soon as they step in.
  • Smart mergers and tie-ups that could allow you to make the most of the office space.

Given the commercial real estate of India and the presence of about 8600 startups in India, the demand for a vibrant cultured office space is quite evident.

Leasing a commercial real estate in metropolitans (where most of the coworking spaces exist) is no child’s play. Most offices can’t afford the rent for a uptown property, and tiny-sized cubicles don’t do for a team of 8 to 12 members, without counting in the costs for operation.

Hence, the shared economy is a great idea for businesses to find a proper spot for their office until they grow out of it, and till then, a the need for coworking space would be felt.

Revenue Streams for Coworking Spaces

There are several ways by which a coworking startup can earn. It’s not limited to only letting chairs and desks for lease.

Memberships

It begins by making loyal customers and we often name them as members. The basic idea is to sublet a portion of the office space to interested business people for a membership fees which include a range of facilities and perks.

Here are a few examples of the memberships offered by some of the leading coworking spaces in India.

91SpringBoard

9JCM

Bangalore Alpha Lab

Utility Rentals

After memberships, come the add-ons. It’s a well established fact that offices need extra supplies from time to time. Even the modest office goers can’t do without wanting for an extra PC or a personal printer at some point in their office-life.

Hence, renting out utilities is another revenue stream for coworking providers. You could simply hand out necessary office utilities that usually cost a lot to members who need something proprietary or extra at times.

The best example of this is the internet speed. Only a few can live without a super fast connection, and if it’s available in the office, only a few would want to skip on it outside their membership plans. Then there’s always room to add more items such as meals and access to entertainment section.

Hall/Audi Rentals

If the property has large rooms that can be converted into makeshift auditoriums or conference rooms, those can act as a separate source of income for you.

91Springboard has a track record of hosting about 13,000 events in a year which and a major chunk of their revenue comes from networking events that take place at their venture. Isn’t that great for publicity as well?  

Future Prospects Of Coworking Spaces in India

The sector is growing at a great speed as of yet and has a lot to offer in the future as well.

The top lot of coworking organizations currently active in India are expected to add about 7 million square feet of coworking space to India’s commercial property landscape which opens up a lot of opportunities for everyone.

Saturation in this sector is expected but it won’t come before the next 5 years, which means it’s a thriving time for running a coworking space in India as of now.

It’s naturally easier for a business who is just taking off to get an office without investing lakhs at one go. Most coworking spaces don’t demand for lakhs in investment but just a monthly fees of using the designated corner of the office, which is lesser than a leased office at a prime location in Mumbai.

There are no legal tenders required to take a coworking place for lease or on contract and you just pay the fees as per your requirements. You don’t have to take care of maintenance and you can use the place 24X7 which is a great option for homegrown startups.

Moreover, a dynamic environment where everyone is hustling to get big goes a long way in boosting your enthusiasm about your own work, rather than a isolated cubicle in a jam packed ten story tower.

Conclusion

On a whole, there is a lot of promise in the sector and coworking space will form a significant portion of the upcoming commercial real estate market of India.

As more startups come up and the enthusiastic culture of working in a modern office sets deeper in India, more coworking spaces would be needed, for which the supply is already taking place.

For businesses too, coworking spaces are generating enough revenue make hefty profits, due to the number of benefits a coworking space offers in comparison to a traditionally leased office.


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