From sprawling business parks and office spaces, to enormous malls with more than a hundred brands, commercial real estate in India has witnessed tremendous growth over the past decade. The sector continues to lure Indian and global investors alike. From office spaces to malls to warehouses, the commercial real estate segment has registered a 40% jump in 2019, as compared to 2018, according to the JLL Pulse – Monthly Real Estate Monitor. Backed by optimistic economic fundamentals, healthy demand and quality supply infusion across sectors, India’s real estate sector is poised for strong growth in the coming years, as well.
The past few years have seen an upsurge in the demand for co-working spaces. There has been a considerable shift, from traditional office set-ups towards an increasing inclination for plug-n-play office spaces. These spaces are seen as a solution to the ever-evolving needs of SMEs, freelancers, startups and multi-nationals alike. Nearly 12 million sq ft of Grade A office space was completed and 11 million sq ft absorbed during the last three months, as per JLL’s Real Estate Market Update for Q3. This is expected to grow three times, over the next three to five years, leading to massive opportunities for this business, in India. Co-working has now established itself as a mainstream segment, playing an integral role in the growth of commercial real estate leasing activity.
Co-working spaces are changing the dynamics of commercial real estate
Shared workspaces are slowly replacing conventional office spaces, with corporates and MNCs opting out of traditional office spaces and choosing modern day spaces with Grade ‘A’ amenities, at affordable rates. As corporates continue to assess flexible space combinations in India, co-working players in the segment continue to enlarge their footprint across the country. Today, India has one of the biggest markets for flexible space in Asia-Pacific and will continue to go from strength to strength. Since its inception, co-working spaces have come a long way. Earlier, landlords were wary of leasing out spaces to operators, due to lack of knowledge pertaining to the co-working business model and unwillingness in making changes to the leasing space.
Furthermore, high leasing rents were a hurdle for many operators and prevented them from expanding their business. The scenario has drastically changed as operators leased about 4.6 million sq ft of space in H1 2019, an increase of about 52% on a y-o-y basis, says Colliers’ The Flexible Workspace Outlook Report 2019.
Shorter leases on collaborative, flexible workspaces are rapidly becoming the norm across major markets. It is emerging as an effective long-term prospect, posing as a lucrative landlord-tenant relationship that resembles traditional arrangements. Flexible spaces not only provide respite to landlords, they are also a haven for startups and SMEs. Viewed as the most suited choice for millennials, collaborative spaces attract working professionals from all fields and professions. It saves them from the hassle of paying huge rents, setting up office spaces during their early years and providing a collaborative environment. Round-the-clock amenities like 24X7 cafeteria, meeting rooms, collaborative zones, etc., at nominal prices, makes co-working spaces the optimal choice for most working professionals. As the corporate world adapts to technology and design trends, it is vital to keep in mind the employees’ needs. Many people value a space that encourages the growth of a community. A community at workplace promotes an open culture, which is beyond hierarchies. A co-working culture solidifies bonds amongst employees and breaks traditional stereotypes of formality and protocol.
The future of co-working spaces in India
As the co-working trend continues, more and more real estate investors are choosing to include co-working spaces in their portfolios. In terms of community members, it is safe to say that co-working spaces serve as the ideal workplace, by bridging the gap between the needs and wants of the community members, by providing optimum infrastructure that promotes work-life balance at affordable prices.
According to JLL’s report on ‘Emerging Trends in India’s office sector’, the total amount of space taken up by co-working space providers, in the seven major cities, has tripled from 1.1 million sq ft to 3.4 million sq ft, over a period of one year. Moreover, the number is slated to only increase in the coming years. From leasing models to world-class technology, co-working is the fastest growing segment and will definitely prove to be a game changer for the commercial real estate business in India.
(The writer is CEO and founder, Awfis)