Coworking spaces vs. traditional offices: Which one is right for Indian businesses?

The pandemic, a quiet storm, reshaped the very foundations of how we work and left behind a trail of change. Now the Indian real estate market stands at the edge of a new dawn where the old ways of office space are being questioned in the light of rising costs, evolving work cultures, and the surge of hybrid models. This question looms large: should businesses cling to tradition, or opt for coworking spaces? The answer is not simple, the space is shifting, and with it, the future of work.

The rise of coworking spaces in India

In India’s commercial real estate space, coworking spaces are rising as a powerful disruptor. According to a 2024 report by JLL India, one in three companies has adopted flexible spaces, with over 74 million sq ft of such workspaces now sprawling across the country’s top seven cities. As businesses seek cost-effective alternatives to traditional offices, the coworking model is gaining momentum, particularly among startups, SMEs, and even large corporations. Global projections suggest the flexible office market will soar to $96.8 billion by 2030.

See more: Top Foreign Coworking Office Providers In India

Advantages of coworking spaces

1. Flexibility and cost reductions

• No obligations to long-term leases
• Pay-per-use schemes cut down on overhead costs.
• Access to desirable places at a fraction of the price of conventional rentals

2. Scalability

• Without renegotiating leases, businesses can scale up or down according to the size of their teams.
• Ideal for new ventures and seasonal enterprises

3. Networking and collaboration

• Innovation is encouraged by having access to a varied professional community.
• Workshops and events provide chances for collaboration and education.

4. Amenities and infrastructure

• Fully equipped offices with breakout spaces and fast internet that function as common spaces for all coworkers
• Likewise, common facilities such as cafeterias, fitness centres, and printers

5. Excellent locations and ease of access

• This model works well for “business districts” of major cities like Bengaluru, Mumbai, Chennai and Delhi-NCR as they house the maximum of India’s urban working population.
• This saves up the employees’ time and boosts their productivity with public transportation accessible at a jiffy, cutting down on commute times.

Disadvantages of coworking spaces

1. Data security concerns 

• Since coworking spaces operate in shared environments, businesses handling sensitive client information may find it challenging.
• With shared appliances, the soft and hard copies of confidential material chances are at risk.

2. Lack of privacy 

• Open-plan layouts and shared meeting rooms can make confidential discussions difficult. 
• Not ideal for businesses that require discretion, such as legal firms or financial consultancies.

3. Limited brand presence 

• Under a shared address, establishing a distinct brand identity can be harder. 
• There is little room for customisation.

4. Dependence on external management 

• Uncertainty of the workspace provider services. 
• In case of disruption, internet stability, facility maintenance, and security can reduce productivity.

5. Availability issues 

• In peak business hours and seasons, meeting rooms and shared spaces might not always be available.
• In this case, even shared appliances can be overworked and lead to delay.

The enduring value of traditional offices

Even while coworking spaces have many advantages, many well-established businesses and industries that need private, controlled locations still prefer traditional offices.

Advantages of traditional offices

1. Brand identity and customisation

• Businesses can design and brand their own spaces to reflect company culture
• Private offices provide an uninterrupted work environment

2. Data security and the notion of confidentiality

• Crucial for industries like finance, legal, and healthcare
• Dedicated IT infrastructure ensures better cybersecurity.

3. Stability and long-term planning

• Long-term leases provide cost predictability and location consistency
• Reduces risks of frequent relocations and disruptions

4. Better space utilisation

• Companies have control over space allocation for departments, meeting rooms, and employee workstations
• Allows dedicated work zones for different teams

5. Employee productivity and well-being

• Traditional offices provide structured work environments that reduce distractions
• Employee well-being initiatives such as ergonomic workstations and wellness programs are easier to implement

Disadvantages of traditional offices

1. High initial and recurring costs 

• High upfront investment, including deposits, interior setup, furniture etc.
• Recurring expenses like maintenance, repairs, and security.

2. Long-term lease commitments 

• Traditional offices typically require long-term lease agreements.
• Reduces flexibility in business operations.

3. Lower networking opportunities

• One strong perk that co-working setups offer is the opportunity to network, in contrast to this, traditional offices limit these opportunities.

4. Higher maintenance responsibility 

• Companies handle facility management, IT infrastructure, and daily operational needs. 
• This can divert resources from core business functions.

5. Less adaptability to remote work 

• Traditional office spaces may not always support hybrid work models efficiently.
• Can lead to underutilisation of space and increased overhead costs.

Factors that can impact your decision 

Cost considerations

• Rent

In comparison to traditional, coworking spaces have flexible pricing models, typically charging on a per-seat basis. For the major Indian business districts, the monthly cost per seat ranges between ₹8,000 and ₹14,000. While, for a conventional setup, the cost operates on a sq ft basis ranging between ₹80 to ₹250 per sq ft monthly. An average allocation per employee is 70 sq ft, which means an approximate cost of ₹5,600 to ₹17,500 per person each month.

• Maintenance

Maintenance cost in a coworking setup, which includes cleaning and general maintenance, is usually included in the membership fee. However, in a traditional office, the tenants are responsible for all fronts of maintenance, which is added to the overall operating cost.

• Utilities

Any form of utility, such as electricity, water, internet, cafeteria, and management is facilitated in the monthly maintenance. However, for a business operating traditionally, the pay for utility is an extra cost but comes only based on the utilisation of the resource, which is as transparent as the business only pays for what it uses and on its preferred vendor’s rates.

• Additional hidden costs

In case of a coworking setup, the access to conference rooms, the printing units, and parking fees are some additional costs that happen as per use, however, for a traditional office, these hidden costs are usually around the initial establishment costs, security deposits, legal fee, and facility management fees which further entails security personnel, HVAC maintenance, and other building management expenses. 

Employee satisfaction and work-life balance

One very important factor for Human Resource Management is to incorporate how employees receive these decisions. Coworking environments, in essence, offer flexibility and a sense of community, which can enhance employee satisfaction. In a report by OnFRA, it is stated that coworking spaces that provide 24/7 access, flexible membership plans, and support for remote and hybrid work models make professionals remain productive and focused more than a traditional office. In a traditional office, however, there is a structured environment, which can provide stability but may lack the flexibility some employees desire, hence, the rigidity in working hours and location can sometimes lead to challenges in maintaining work-life balance.

Employee retention rates

It is essential to gauge the reception of the employees, and one way to do this is the Employee Retention rate. In a coworking space, the dynamic and flexible nature can contribute to higher employee retention, as MyBranch reports a 90% client retention rate among people working in their space. In the case of traditional offices, they offer consistency but they may not cater to the evolving preferences of the modern workforce seeking flexibility and can impact the retention negatively.

Lease terms and flexibility

A coworking space usually offers short-term memberships without the need for long-term commitments; this, in return, allows businesses to scale operations up or down based on current needs without the burden of lengthy leases, however, traditional office leases often require long-term commitments, usually spanning several years which makes for agreements with significant upfront costs.

Location-specific insights

Metropolitan cities: Mumbai, Delhi, Bangalore

Coworking spaces are championed in the Metropolitan cities of India as these cities are not only home to most of India’s urban working population but also these coworking spaces offer cost-effective alternatives to traditional offices to businesses. In the Economic Times, a report states that there is a surge in demand for coworking spaces in these cities as companies enforce return-to-office policies making these options extremely useful.

Tier-2 cities: Ahmedabad, Pune, Jaipur etc

Coworking spaces are expanding gradually in Tier-2 cities, too. There is an increasing demand from startups and SMEs, this growth provides businesses with affordable workspace options. This is a new concept in these cities. 

GST compliance in coworking spaces

Goods and Services Tax (GST) compliance is an essential component in case an individual wishes to curate a coworking space. Coworking spaces are subject to an 18% GST rate, which applies to services provided. This entails renting of immovable property. Coworking operators should keep the invoicing and GST filling as a crucial documentation task to stay tax compliant and the businesses utilising these spaces should verify that the coworking provider adheres to GST regulations, too.

Key market trends: India’s office space evolution

• Hybrid work models: While the debate about working from home or office is settled with a hybrid mode of working, the newer discussion is on the effectiveness of working from home, so in this confusion, a coworking space steps in. 
• Tier-2 and Tier-3 city growth: Tier-1 cities are already equipped with spaces accommodating their working style, there is a new demand for coworking spaces in cities like Ahmedabad, Pune, and Jaipur due to lower operational costs.
• Green & sustainable workspaces: One perk of this debate is that businesses are now actively taking steps to build energy-efficient office buildings to align with ESG goals.

Which one should your business choose?

Ideal scenarios for coworking spaces:

• • Startups & freelancers: Looking for cost-effective, plug-and-play office solutions
  • Expanding companies: Scaling operations without committing to long-term leases
  • Creative & tech companies: Thriving in collaborative environments with shared resources

• Micro, Small, and Medium Enterprises (MSMEs): Cost-effective solutions for networking and working spaces works best for MSMEs

• Consulting and professional services: Consultancy firms find coworking spaces handy when dealing with clients’ geographical location.

Ideal scenarios for traditional offices:

• Large corporations: Needing stability, brand presence, and exclusive office layouts
• Legal & financial firms: Requiring data confidentiality and secure workspaces
• Manufacturing & logistics: Needing specialised spaces for supply chain management

Future outlook

As the flexible office market is expected to grow by 15-20% annually, Indian businesses should stay agile in their real estate strategies: whether you choose a coworking space or a traditional office, you need to accommodate the concurrent market trends to stay competitive in this space. 

Housing.com POV

Businesses are championing this shift with each passing year, but vigilance and priority to employee satisfaction should be the two major focal points to navigate this tricky terrain. Companies are increasingly opting for a mix of traditional office setups and coworking spaces in this battle, hence, the real estate investors and businesses should keep an eye on their operational needs and market trends before making a decision.

FAQs