Co-working Spaces – Coexistence in Business

Koheli

Flexibility is the keyword in every conversation today. Today's millennial culture especially takes towards flexibility and the comfort it provides in all terms of life. The term and concept have a solid meaning in various aspects, both public and personal; in this context, the translation of flexibility works towards co-working spaces.  Any individual residing in Tier-1 cities of Delhi, Mumbai or Bangalore, or any other foreign city will be very familiar with the concept of co-working spaces, the most important of which is its rising importance in the current global scenario.

India presently states claims for 850 such co-working spaces all over the country – while a majority are focused in the cities mentioned above that act as the prime centers for the peak of globalization and start-ups, close to 179 of such spaces are placed in Tier-2 and Tier-3 cities, such as Kochi, Chandigarh, and Ahmedabad, . The concept and its application have seen a growth that was unprecedented but highly advantageous for the rising start-up and entrepreneurial culture in India; the country is only second to the number of such places, coming behind China. From 2016-19, the deals made on co-working spaces rapidly increased from US$ 49.7 million to US$ 96.5 million, with investments on various scales and levels of operation. Examples of well-known cow-working spaces rampant in India include WeWork based in New York (renamed as The We Company after setting out an IPO prospectus), 91 Springboard, Coworks, and InstaOffice. 

Co-working spaces boast of the high levels of collaboration because of the various levels of interaction deeply seated into the culture – the flexibility and various contacts made in participation of such a movement has inspired many start-ups and inspiring companies. The flexibility assures a breather to the already stretched out funds of most companies as compared to single office spaces in highly crowded cities. In a country where, until recently, working in small spaces automatically meant that the company was a small start-up with barely enough funds to scrape together a moderate office, this has now transformed into companies of all sizes and natures coming together to intake in the co-working space culture due to its affordable rents, well-maintained infrastructure, much-needed networking and communication with peers followed by the many business opportunities of progress.

The few issues faced by the organizers of co-working spaces include operational challenges in limiting the costs incurred while attempting to not compromise on the quality of the services offered within these spaces. These services are also looking to standardize their amenities and declare common prices in the interest of offering better and unified experiences with the least issues. Such an experience constitutes enough turnaround time for the resolution of all the issues of the client and satisfying the demands and ensuring enough opportunities for the blue-collar stuff. Collaboration is a key them of capitalization for such institutions and forms a major reason as part of the business opportunities that many companies look forward to – this involves signing up for life-changing mentorships, initiating collaborations with the right number of organized sessions and events for interactions and people management. All of these make sure that the plate is full for the upcoming future concerning co-working spaces.

Another factor to look out for is the minimum occupancy level for some level of operating profit in the progression of co-working spaces. Occupancy reaches different peaks at different times of the year for different seasons, so organizations are tasked with following the trend levels and maintaining a minimum crowd while working on a strategy to extend the same services to other geographical regions with the same principles. A contradiction works itself in the context that while the rental commitments of those in charge of organizing the space are long-term commitments extending to possibly 10 years or so, while their clients have very short-term commitments to these organizers which leaves the situation open to a lot of uncertainty, mismatches in demand and supply along with inefficient optimization of the capital available. This explains the recently recognized fact, supported by research, that while the demand and the recognition of co-working spaces have increased and they are being praised for their role in improving the business culture, only less than 40% of such working spaces are profitable.

Involving in co-working spaces, therefore, has its tricks and long trips before profitability – buying long and selling short, as it is popularly put forward. However, it remains a steady fact that co-working spaces are a profitable mine that provides diamonds in the long run. For example, Awfis, a co-working space organizer, followed the managed aggregation model (a straight lease); under this, there are possibilities of cooperation with owners of underutilized commercial ideal for these services after striking a no minimum guarantees deal. The owner of the space should then make adjustments according to the demand and appropriate fittings for the infrastructure. Only 30% of the seats are under a straight lease basis, where the organization has taken up properties in this manner on rent. In this manner, existing space is utilized effectively without attempting to create a heavy overhead that adds to the pre-existing space – both risks and financial assets required are on the lower side of the spectrum. Another manner of ensuring providing such spaces is differentiated on some level, certain organization ensures that the amenities provided apart from the space which includes allowing for business opportunities through events meant for sprucing up such communication, investment opportunities, facilitating B2B opportunities most essential to young and small start-ups as well as assuring mentors for the professionals just getting started on their field. All these assist the companies working together to increase their networking circle and opportunities. 

The best comparison to co-working spaces would be that it works like Ola and Uber, but for real estate. Building on this fact, flexible working spaces could not find more advantageous conditions in real estate as it is at present – the industry is looking at cheaper costs in real estate that also builds the concept of fractional ownership that again adds to the available flex workspace.  Commercial real estate in its traditional form has now been disrupted with such co-working centers; where reports account for 325-330 operators of such spaces within these cities and areas involved in the transaction have been steadily increasing from 52000-77000 square feet (2018-19). 2020 can see a number close to 13 million people working in such facilities and offices are getting ready to incorporate such office space within their facilities as well. The affordable pricing provides a huge advantage and rents as low as 10000 per seat for a month, which all adds up to fewer utilities required and costs of setting up operations into motion, with the added advantages of grabbing business opportunities and sessions for all-round development. 

By 2018, the total leasing market saw 10% exclusively under co-working spaces. The US and Europe were quick receivers of the trend and was rapid in the adoption of this culture, but this took time in India as the country believes in the idea of personal space when working in an office and sharing spaces did not mean flexibility and adapting, rather the lack of funds and apparent failure of the enterprise, leading to a lot of hesitation as concerned with the business model. Even freelancers and participants of the gig economy expect the flexibility of the work environment while being provided the opportunity to build connections through networking and communication with similar-minded people in such spaces. It helps that these spaces are much more economical and lessens the financial burden on the working individuals. Co-working spaces offer creativity in the various themes they strive to adopt as well as the idea of a unique space that does not always have to be professional to seem like the company is financially successful – creativity and entrepreneurial behavior can also progress in a simple homely setting or even a nature-themed workshop, even among counterparts who also have anger issues that you met a stress-free event. There are promises, and fulfillment of these promises, on the topic of sustainability – shared facilities and workspaces maximize the utility of space and optimizes what is already available that is practically the essence of the concept. Adopting other green initiatives also seem to gather more support among such facilities due to similar minded people, with enterprises and well-established companies following the trend also.

India gets the opportunity to grab the title of being the youngest start-up nation with more than 70% of the founders of various companies being under the milestone of 35 years – co-working spaces will serve the need of increasing the creativity, communication, collaborations, ideas and opportunities for networking; added to this is the element of flexibility which remains crucial to this debate in adapting to the latest methods and way of enhancing productivity and using technology for progressing along the global pace while still being friendly to the pocket of an aspiring entrepreneur. 

Many organizations are looking to increase the number of seats and share of commercial properties under the tag of co-working spaces, thus decreasing the problem that new companies often face under the situation of lacking space to meet. There are plans on taking full advantage of Tier-2 and Tier-3 cities, now that Tier-1 cities are reaching their full capacity and potential. These cities are looking to add at least 8.5 million seats by 2020 – existing expansion that is happening at a rapid pace, a demand from many clients that do not look to be diminishing any time soon, increasing encouragement and participation from existing real estate owners with a good risk appetite and support from the co-working operators can see the area under this arrangement even triple on the existing capacity. 

Such plans also set forward the inspiring cycle of setting forward spaces by utilizing real estate, encouraging ideas and entrepreneurs within their safe spaces which leads to the development of the industry and associated economies of scale. Many others look forward to the opportunities that will be presented once the present organizations build up the existing capacity, saturate the existing market and construct the foundation, before looking to capitalize on the emerging demand after this stage, considering there is a 33-35% year-on-year growth to look out for. This ticks many checkboxes and organizers and clients, as well as future aspirers of their own companies, must keep on top of this exciting new opportunity.

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