Firms now look to serve clients with more long-term commitments, rather than leasing individual desks or seats
The share of co-working in total office leasing spiked from 8% in 2018 to 14% in 2019, as per JLL India estimates.
After a phase of rapid expansion, co-working startups are looking to raise fresh capital and turn profitable to support the next leg of growth, as demand for collaborative workspaces remains high in India.
The dynamics of collaborative workspaces are also changing and moving towards enterprise clients with long-term commitments, and building customized products, rather than chasing smaller startups and entrepreneurs, and leasing individual desks, or seats.
Top operators, such as WeWork India, Smartworks Coworking Space Pvt. Ltd, Awfis Space Solutions Ltd and Table Space Technologies, along with smaller firms, such as IndiQube and CoWrks, make up over 80% of flexible space leasing and are looking at strategic expansion through an asset-light or revenue sharing model, to burn less cash.
“The co-working market today is driven mainly by the top operators with multi-city presence. Expansion was the focus so far, but now that it’s an established form of business, they are looking at profitability, raising capital and the operational part. It’s a volume-driven business, so operators are looking at prime locations, larger clients," said Viral Desai, national director, office transactions, Knight Frank India.
IndiQube, which had raised capital from WestBridge Capital India Advisors in 2018, is looking to raise $30-50 million to fuel expansion as the Bengaluru-based firm looks to nearly double its 2.5 million sq.ft operational space in the next 12-15 months.
“Larger enterprises are asking for bigger spaces. The momentum has built up and we need a new round of funding for further expansion. We are undertaking buildings that can be upgraded or converted to office spaces as well as distress assets stuck with lenders," said Rishi Das, co-founder and chief executive officer (CEO), IndiQube. The firm has already turned profitable.
WeWork India has already added 5,000 seats this year and plans to touch 10,000 seats by June. However, a lot also rides on the fundraising plans it had announced last October to support growth. The Indian affiliate of the New York-based We Co. also plans to turn profitable this year.
“While we continue to grow and hold on to our market share, the larger focus is on profitability. Capital is a big driver, on how fast or slow we grow. Unlike earlier, when we tried to grow fast, we are now looking at deals where the desks we are adding are funded by landlords, in fully-funded management contracts or revenue sharing," said Karan Virwani, who heads WeWork India.
Even Bengaluru-based CoWrks, which had said last year that it will raise $50 million, is still self-funded and not raised any external capital so far. Abhishek Goenka, CEO, CoWrks, said while it will add 15,000-20,000 seats this year, no one is building speculatively anymore and are moving towards built-to-suit facilities.
India’s co-working segment has seen significant growth in recent years and is now a catalyst of sorts for modern workspaces. The share of co-working in total office leasing spiked from 8% in 2018 to 14% in 2019, according to JLL India estimates.
Smartworks Coworking Space Pvt. Ltd, which turned profitable last year, and raised $25 million from Singapore’s Keppel Land last year, follows the traditional deal with landlords, and has started taking up larger spaces across the top nine Indian cities. “Today, everyone is focusing on profitability rather than just achieving the topline and there is no irrational expansion," Smartworks founder Neetesh Sarda said.
Awfis Space Solutions Ltd, one of the largest and well-funded co-working startups, plans to set up centres in even smaller cities such as Kochi, Ahmedabad and Indore.
Awfis founder and CEO Amit Ramani said the startup has adopted various formats, including managed aggregation in partnership with landlords and an asset-light model, besides offering a few seats for small businesses, and providing up to 1,000 seats for a large enterprise.
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