The demand for flexible and co-working spaces will triple in India in the next three years, fuelled by start-ups as well as big corporates. Co-working companies took up 2 million sq ft of commercial office space in the first quarter of this year alone, which is more than the 1.8 million sq ft they took up in 2017, Knight Frank said in a report today.

“The expansion plans of major players and the increasing appetite for this format from occupiers, property owners and co-working operators should see annual transaction numbers triple from current levels over the next three years,” it said.

“Due to the changing perception of the office, the workplace is being viewed as an instrument that could drive a dynamic and vibrant culture of corporate productivity. The co-working operator is filling this niche and is fast being regarded as a specialist in workplace management, who can cultivate an environment of collaborative enterprise that yields tangible benefits to the occupier,” said Dr Samantak Das, Chief Economist and National Director-Research, Knight Frank India.

Currently, NCR, Mumbai and Bengaluru house most of the co-working stock in India, followed by Pune and Kolkata. Earlier, co-working was the domain of start-ups, SMEs and freelance workers who needed the flexibility of tenure as well as cost that a standard leased office space could not offer.

“However, the advantages of the co-working proposition have caught the attention of the more established and mainstream occupier. Approximately 50 per cent of the client roster of an Indian co-working operator is made up of big corporates. This can rise to as high as 80 per cent in the more premium priced offerings,” Knight Frank said.

In Q1 2018, the highest co-working transaction activity was witnessed in the Bengaluru, NCR and Hyderabad markets, which contributed 43 per cent, 16 per cent and 15 per cent respectively. “Although there is a lot of discussion on whether co-working will replace traditional office spaces, it is important to note that a co-working space is complimentary and does not conflict with the traditional office space and that both co-exist. Going forward, we will see occupiers using a mix of both flexible and traditional spaces,” said Viral Desai, National Director-Occupier Solutions Group, Knight Frank India.

“However, there are two major challenges that co-working operators will face: one, they are buying long and selling short hence the financial risk, and the second is not meeting customer expectations, thus leading to an erosion of value associated with a negative or declining customer experience,” he added.

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