THE FLEX SPACE RENAISSANCE
Covid Pandemic has changed a lot of things in real estate and opting for ‘flex space’ is one of the latest change. For almost a decade, co-working sector was getting more attention from Startups but, the Covid pandemic in 2020 made the enterprise businesses too, to consider coworking spaces for cost and resource efficiency. Amit Ramani, CEO & Founder, Awfis while summarizing the year 2021 shared, “With a measurably positive consumer sentiment towards working from office and the decline in the number of cases post the second wave, more corporates have been opting for flexi spaces. In line with this Awfis saw a rise in the demand of seats, going upto 17,000 new seat sales from September to December 2021. According to industry experts, the co-working segment is expected to grow three fold in 2022, changing the dynamics of the workspace and modifying the future of work. Financial saving is one of the main reason for change in office space model. It is also a great option for companies who do not wish to be tied down to a long-term lease and would rather have a flexible cost structure. In addition, as per Gartner, 50% of Indian hybrid workers consider themselves more productive when working remotely which makes co-working space a best option for remote employees. The Coworking model is fast spreading to the tier 2 and tier 3 cities as well, with many of them already becoming the startup hubs of India. Robin Chhabra Founder & CEO, Dextrus defined year 2021 as steady and growing for his company. “With our first location in BKC we have stayed steady at healthy occupancy levels. Growing, because we launched our second center in Lower Parel and sold out our existing occupancy in 3 months,” he said TRANSFORMATIVE WORK CULTURE Since opening of lockdown co-working space business is on the recovery mode and is expected to increase its market share in total office space. The hybrid work lifestyle has not only changed the dynamics of Indian working culture, but is also pushing the commercial real estate market to take note of this change and act on it. The traditional way of leasing or buying space for market is getting replaced by building infrastructure for flex spaces that can keep pace with changing needs of the occupiers. Amit Ramani adds, “With a pandemic-induced shift in both workspace needs and preferences, we see a continuous evolution underway to cater to integrated workspace needs. While the notion of coworking spaces just catering to startups and individuals have become redundant, large corporates are now partnering with flexi spaces for factors like keeping up with the changing business dynamics, remote workers, talent acquisition and retention. Additionally, with reverse migration induced by work from home and lockdowns, coworking spaces have potential to expand rapidly in the Tier II & III markets of the country.” Till now, startups and SMEs were the flag bearer of co working offices trend in India, but now big companies are also looking at co-working spaces to expand their business with minimum cost involved especially for infrastructure. Moreover, with technological advancements, co-working providers offer remote working solutions too such as virtual offices, Iot based connectivity and networking systems and needs. Digitization in Coworking spaces now includes features like advanced space management software, booking system, attendance system, automated invoices, keyless access powered by Internet of Things (IOT) etc. Lease and rent system is giving way to on-demand and membership passes and many flex space providers have started offering exclusive and niche coworking spaces to businesses. What is also evident is the changing demands from the coworking spaces. Customized office spaces, enhanced health and hygiene facilities and wellness quotient are becoming a prerequisite for the clients. Robin Chhabra concurred, “More and more companies (and of all sizes) are beginning to look at the flex space segment as a viable option for their office requirements. Capitalizing on the accelerated demand for flex offices amongst large corporates, Kunal Walia – Founder & CEO, Simpliwork said, “2021 has been a milestone year for Simpliwork in terms of business growth. We have been able to offer agile solutions vis-à-vis world-class offices across leading markets. Simpliwork, with its supply of Grade A flex offices, is looking to capitalize on this trend and argets to double its inventory across India to 6 mn sq. ft by end 2022.” Undoubtedly, the need to re-strategize workspaces by organizations returning to offices, will see them leveraging flexi spaces to reduce cost and expenditure. This will be the major driver for future growth and expansion plans of established and upcoming co-working companies. What we might witness in 2022 is the specialization of coworking spaces, dedicated to a certain industry niche or group of entrepreneurs. EXPECTATIONS FROM THE UNION BUDGET 2022-23 The pandemic seems to have forever changed the way of working as we knew. The flexible co-working industry has become ever more relevant as enterprises and corporates from large to small are shifting gears and embracing the hybrid work model. Not surprisingly the flex space segment players have major expectation from the upcoming Union Budget that can further accelerate growth of this sector. Amit Ramani expressed, “Amidstthe new normal, the coworking industry has become a significant component of the real estate realm. Therefore, at Awfis, we expect the government to enable tax concessions for the start-up sector. The deductions will encourage the existing and upcoming startups to thrive in a competitive environment with the help of coworking spaces. The budget should also focus on infrastructural push and a single-window clearance system that helps in faster establishments of coworking spaces in non-metro cities.” Robin Chhabra added, “From a coworking business perspective I do feel recognition as an industry is important and bringing the industry into the 2% TDS bracket from the present 10% would go a long way in helping alleviate the pressures of cash flows.” THE WAY AHEAD In 2022, co-working will be the future of office space as it adapts In line with the same, the coworking seat absorption will be at its all-time high in 2022 and Awfis aims to double its presence from 100 centres in January 2022 to close to 200 centres by the end of 2022.” “IT remains the major driver of the office market in India. Co-working spaces have reinvented their offerings and repositioned Given that the current scenario and the number of market players, there is still substantial room for growth in the flex segment. With the growing demand for flexible We also added close to a million sq. ft. area to our overall portfolio. With hybrid offices and work arrangements taking centre stage, managed office spaces have gained significant popularity and have become an integrated part of portfolio strategy for enterprises.2022 will see a complete transformation of offices into smart and dynamic spaces that incorporate the latest technologies to facilitate better workspace management and experience with data-driven decisions. Office experience has become more critical in the ‘new normal’ than ever, so a lot of focus will be on implementing the right tech solutions in workspaces for real-time insights on space optimization and utilization, leading to overall efficiency."
The absorption was slower prior to COVID and we see that it has accelerated in the 2 years of COVID. This shall continue, non-metro cities.” as flexibility of space and service will be key drivers in the decision making process for office spaces.
Additionally, the sectors is expecting the government to enable co-working firms to claim input credits on work contract and construction services supplied, hat can
enable outflow of cash and can be spared from 18% levy. The co-working industry also hopes for reduction in the rate of TDS on coworking services. Presently, the
rate of TDS applicable on coworking services is 10% as they provide renting of both movables and immovables.
and caters to the new hybrid work or remote work trend. In addition, as there will be new startups in the market especially those in the IT sector, new opportunities will emerge for co-working space providers as well as developers of such spaces. Also the demand from tier 3 cities have increased which was not the case earlier. Not surprisingly, the CII-ANAROCK predicts the market size of coworking spaces to double over the next five years at a compounded annual growth rate of 15%.
In Amit Ramani’s opinion, the coworking sector aligns perfectly well with today’s decentralized business models. He stated, “In India, there are several factors that are leading to the boom of the sector which includes - the IT sector at the forefront to return to work, the rise of startup culture and demand for office spaces from Tier II & Tier III markets.
themselves to suit the needs of occupiers. Sectors such as BFSI, co-working, real estate, have increased their share of the pie, giving hope that the Indian office market
space has weathered the second wave and will come out stronger in 2022” said Arvind Nandan, Managing Director, Research and Consulting, Savills India.
and well-equipped work environments across industries and business, this segment is only expected to see a significant upswing. Rightly, so Robin Chhabra describes
the outlook for 2022 in just one word - Surging. “The sector shall continue to grow in 2022 and Dextrus shall be a part of that growth as we look to expand our presence.
Our ethos is to question the norm and not be satisfied with the status quo which makes us very excited about leading the way in innovating our three focus points of design, build and operations,” he stated. Going forward we are also going to see hospitality assets like hotels, restaurants and cafes offering coworking spaces. The beginning has already been made and the trend is only going to get bigger. The model offers the facility owners of diversifying their asset allocation and generate
income. What is needed is recognition of this sector as a realty segment. Also, government’s initiatives towards promoting ease of doing business for the real estate sector
through single window clearance, infrastructure status and enhancing connectivity to all part of the country, will help promote various emerging asset classes such as co-working across metros and smaller cities. Neetish Sarda, Founder Smartworks sharing his outlook for stated, “"Managed office spaces will continue to grow, given the
value, agility, and flexibility it offers to the occupiers. The year 2021 started slowly, but the demand for fully managed office spaces gradually increased, with us signing major multi-city deals with large companies.
Tags : Amit Ramani CEO & Founder Awfis Robin Chhabra Founder & CEO Dextrus Kunal Walia – Founder & CEO Simpliwork