Leasing by co-working operators is expected to increase by 42 per cent in 2021 at 4.9 mn sq ft over 2020 with shared offices likely to gain greater significance in the post-COVID world, according to the latest report on co-working spaces titled ‘Collaborative space in dynamic world order’ by Savills India.
As organisations reassess their overall office space requirements and look for workplace flexibility in the wake of the pandemic, co-working operators will reposition themselves and continue to drive the commercial real estate market of the country, according to the report.
In 2020, co-working players are expected to lease around 3.4 mn sq ft. accounting 11 pc share of the total office leasing market. Although the overall leasing activity is expected to reduce significantly in 2020 as compared to 2019, it is expected to increase steadily over the next two years. The share of co-working space take-up in overall office leasing activity is poised to rebound to a 15 pc share in 2021, similar to the 2019 level.
As per the report, over 3,000 co-working centers across the country are likely to offer approximately 1.0 million desks by 2022. Additionally, leasing activity by the co-working segment is expected to grow by 29 pc during 2015-2022.
India has relatively larger co-working formats spanning to about 50,000 sf compared to world average of 7,000 sf
In 2020, as of Q3, Bengaluru and Hyderabad had a combined share of approximately 66 pc of the total leasing activity in the co-working segment. The overall stock, expectedly, has been highly concentrated in these two cities, and approximately 51 pc share is expected by 2020-year end.
Co-working in India has grown from having a 5% share in 2016-17 to about 15 pc in 2019. Although the pandemic related uncertainty in commercial office market has impacted the growth trajectory in 2020, it is still expected to contribute around 10% of the overall leasing activity in 2021 and 2022.
Arvind Nandan, Managing Director, Research and Consulting, Savills India, said, “Over the years, shared office space has emerged as a separate asset class bringing significant cost-advantages to Arvind Nandan. While it was initially dominated by establishing workspace we have seen an increasing preference by mid-sized firms as well as large corporations.”
As per the report, the pandemic could possibly lead to an array of trends in the co-working segment including the rise of marketplace platforms with sectoral expertise in flex spaces and increased consolidation with large investor-backed operators weathering the storm successfully. Co-working operators are also expected to tap into residential and retail market offering an integration of retail centers and office spaces.
Naveen Nandwani, Managing Director – Commercial Advisory & Transactions, Savills India, said “At a juncture when co-working spaces were seeing a strong growth, the outbreak of pandemic has changed the rules with social distancing and de-densification of workspace becoming imperative. However, we believe that flexible workspaces will reinvent and reposition themselves, emerging stronger on the other side of the pandemic.”
A survey conducted among occupiers and operators, as part of the report, indicated few aspects that are likely to alter the co-working offerings in the near future. About 60 pc of occupiers believe that Work-From-Anywhere (WFA) trend is likely to stay in the near to medium term. Hence, organisations are likely to switch to a hub and spoke model. As per the survey, 61 pc of occupiers seek shorter lock-in period and rent assessment cycles as businesses have become highly dynamic.
Thirty per cent of the developers surveyed strongly agreed that technology is going to shape the future of workspace. With 93 pc employees wanting a commute time of less than an hour, developers foresee a high demand concentration in the suburban and peripheral areas of cities. Apart from rental reassessments with occupiers, 79 pc of the developers recognize that they are expected to meticulously and rigorously analyse force majeure clauses among other aspects.
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