WeWork India, the local affiliate of New York-based co-working startup, The We Company, is working on improving profitability, rationalizing the rate of expansion and product prices, and catering to large enterprises, said a top company executive.
“One of the biggest components of spending money in this business is capex (capital expenditure). As we scale, we are looking at lower capex, lower rents and at prices, where all our competitors are. We are focusing on profitability, and while we will continue to grow, it will be rationalized," Karan Virwani, WeWork India’s “chief We officer", said in a telephonic interview.
WeWork India currently has around 52,000 desks across five cities, of which, roughly 50% belong to enterprises. It is opening its first centre in Hyderabad this month.
In October, The We Company required a $9.5 billion bailout from Japanese investment firm SoftBank Group Corp., after its plan to launch an initial public offering was shelved. WeWork, whose valuation had already plunged, came under increased scrutiny for its business model and corporate governance, among other issues.
Embassy Group chairman Jitu Virwani-owned Embassy Buildcon Llp is the holding company of WeWork India. It is yet to become profitable at the company level, while individual centres are making money.
WeWork India, which entered the country through a brand franchise agreement and opened its first centre in 2017, aims to become profitable by next year. In November, the firm said it will build cost-effective spaces tailored for home-grown, traditional Indian businesses and enterprises of all sizes. Two such centres will come up in suburban Mumbai and Gurugram.
Virwani said the mid-market product is based on customized products to meet local demand. Instead of building large centres and then customizing them as per clients’ requirements, the firm now wants to pitch select buildings to enterprises and then customize them as per their needs.
In 2020, WeWork is looking to attract more enterprise clients with longer lease commitments, a flexible product portfolio and the unique community experience that the brand is known for.
“Pushing costs down is important. If you aren’t growing too fast and your capex expenditure is low, then hiring can also be controlled. Earlier, we hired people in large numbers. The expansion plan is also not just about how many desks we can add but how many we can sell (lease to users)," Virwani said.
Real estate consulting firm CBRE South Asia Pvt. Ltd in its latest report on flexible workspaces said that the overall flexible space take-up in the September quarter stood at 2 million sq. ft. Mumbai, Bengaluru and Hyderabad accounted for about 70% of office space take-up. Bengaluru dominated the flexible space stock with 7.8 million sq. ft., followed by Delhi-NCR and Mumbai, with 6.7 million sq. ft. and 4.6 million sq. ft respectively.
“Clients continue to take up flexible spaces in co-working centres and demand has not waned. Going forward, we think clients or tenants will increasingly ask operators or developers to keep a part of built-to-suit properties made for them, as flexible spaces," said Viral Desai, national director, office transactions at property advisory Knight Frank India.