Startups give up office space to curb real estate costs, embrace work from home3 min read . Updated: 16 Jul 2020, 06:29 PM IST
- PolicyBazaar has given up four of its 12 office buildings in Gurugram, MobiKwik has shut one satellite office
- Startups are also looking at hybrid-models, where they will get back teams on a rotational basis
BENGALURU: Startups are giving up office space, including rented buildings and seats in co-working centres, to cut costs amidst business uncertainty and with employees not returning to work anytime soon.
In recent months, companies such as Uber Technologies Inc, Swiggy, PolicyBazaar, Instamojo, Ezetap, MobiKwik, upGrad and a slew of others have shrunk their real estate footprint, letting go of office space across metros.
Softbank-backed insurance unicorn PolicyBazaar has given up four of its 12 office buildings in Gurugram, after the lockdown, as it has seen business lines like lending registering a steep drop in demand.
“We have also considered reducing our real estate footprint and have not opened our offices since the first lockdown. We expect to operate from home for the next few months, and have let go of one of our five rented satellite offices," said Upasana Taku, co-founder of MobiKwik, a digital payment startup.
MobiKwik does not plan to let go of its Gurugram headquarters, but is re-negotiating rental agreements and may look at co-working options for its satellite offices, Taku said.
A Swiggy spokesperson said that the effect of the pandemic has altered its utilisation of real estate.
“…It forms a significant part of our ongoing fixed costs and hence, we have optimized our network of kitchens and rationalized office space across cities. We have scaled down our cloud kitchens temporarily or permanently depending on profitability profile, and carefully reduced real estate usage by consolidating many of our smaller offices," the spokesperson said.
Swiggy has shut down offices in tier 3 and 4 cities, including Gorakhpur and Ananthpur, and aims to reduce real estate space further.
With most companies allowing employees to continue working from home (WFH), possibly for the rest of the year, and businesses under pressure in general, it only makes sense to slash fixed costs like real estate.
Ezetap, a payment solution provider, has decided to let go of one of its offices in HSR Layout, Bengaluru, and reduced 35% of its rented space.
“The WFH scenario at Ezetap has worked well for all employees so far, as we see an increase in productivity from employees. WFH has also allowed us to save on certain other add-on operational expenses like food and pantry expenses, housekeeping charges, office broadband, electricity etc," said Byas Nambisan, CEO, Ezetap.
Ride-hailing firm Uber recently shut its Mumbai office after laying off 600 employees in May. Two-wheeler mobility startup Bounce is offering to lease out 150 seats at its JP Nagar office in Bengaluru, for the short-term.
Startups like Vayana Network and CashKaro have also let go of offices in different locations.
Many startups are also pulling out of their agreements with co-working centres.
Sampad Swain, co-founder and CEO of Instamojo, a technology platform for small businesses, said it has given up 30 seats in a co-working facility in Gurugram.
Edtech startup upGrad too has let go of multiple co-working spaces across six cities.
Rishi Das, co-founder and CEO of IndiQube, a co-working operator, which has several startups as clients said that most of them want to reduce real estate costs and are giving up a portion of their seats, due to WFH and a downsizing of workforce, in some cases.
Startups are also looking at hybrid-models, where they will get back teams on a rotational basis, to reduce the risk of spreading covid-19 to employees, starting September.
“We are evaluating a hybrid model for our corporate office in Bengaluru", said the Swiggy spokesperson.
“For when the pandemic is over, we are internally building systems where teams can come to the office on a rotational basis, keeping all safety precautions in mind," said Nambisan.
Mihir Dalal and Salman SH contributed to the story.