Coworking and Managed Office Industry Witnesses Growing Demand from All Occupiers
CXOToday has engaged in an exclusive interview with Mr Aditya Verma, Founder & CEO, The Office Pass(TOP)
- What kind of occupiers are looking for spaces and if you can talk about demand as well?
Pre-Covid the Indian Coworking industry was popular among freelancers and startups only. However, post the pandemic the Coworking & Managed Office industry is experiencing good demand from all occupiers including freelancers, Small and Medium Businesses (SMBs), Startups, Large organisations and Multi-National companies (MNCs).
There is high demand for Coworking spaces from freelancers, Startups & SMBs who take-up between 1-500 seats. This segment is relatively price sensitive and do not want to enter into long term arrangement. Higher flexibility and affordability are their prime concerns. This is the fastest segment for the Coworking industry.
Large organisations and MNCs clients (who take up over 500 seats) prefer a Managed office environment. They want their offices to be customised for their specific requirements and as per their brand guidelines. These occupiers are willing to enter into long term arrangements and are less price conscious. A high-end, customised offices where all office operations are managed by a professional operator are their prime concerns.
- How do you see 2023 unfolding for the coworking industry in the country?
Out of the last 2-3 years, 2023 is possibly going to be the best year for Coworking Industry. I say this because of three factors. Firstly, the fear of Covid is firmly behind us. Companies that were earlier apprehensive regarding returning back to office are less worried about the pandemic. This is driving demand from all types of occupiers. Secondly, due to correction in commercial property prices, Coworking players are able to offer attractive deals to clients. Companies stands to save 18-22% in their office operational expense, merely by shifting to Coworking spaces. This cost saving is making companies shift from traditional offices towards Coworking. Finally, there is huge formalization of Indian economy. Small and Mid-Businesses (SMBs) that were earlier out of the GST purview and were operating from homes, basements or un-authorized colonies are looking to become part of the formal economy. This is driving demand for Coworking.
Coworking industry that currently accounts for 18% of all commercial real estate absorption touch 25% absorption levels in next 18-24 months. Owing to above factors, the industry is likely to grow at a healthy pace over the next 2-3 years.
- Whats your view on recession and demand for flex spaces?
The fear of a recession in India is grossly overstated; although I do feel the recession may be a reality among few European countries. US may undergo a few quarters of slowdown but the current employment data from there is also indicative of a soft landing. India is going to be the fastest growing large economy in the world on the face of domestic consumption.
Indian businesses that get directly impacted with the European economy may feel the heat during 2023. This at best is a small percentage of the Indian economy.
The demand for flex spaces is likely to surge over the next 18-24 months as the factors in its favour far outnumber the ones against it. None of the factors that are driving the demand for Flex spaces is likely to get impacted by the recession.
- How is neighbourhood Coworking different from Coworking spaces
TOP is the only company in the industry offering Neighbourhood Coworking which is different from conventional coworking as it caters to target audience nearby (< 5 kms). The fundament premise is that SMBs love to work in a high-quality office facility close to their place of residence / business rather that commuting long distance. This makes TOP unique in its target segment, pricing, marketing and size of offices. TOP offices are located in the CBD areas as well as around residential neighbourhood so SMBs can reach the nearest office without having to commute long distance.
- What opportunities exist in tier 2 and 3 cities for the Coworking players?
Currently the commercial real estate stock is concentrated in the in top 8 Indian cities. The total grade A stock is around 650-700 Mil SqFt. Annually around 40-50 Mil SqFt of fresh stock gets added; while the absorption is 35-40 Mil SqFt. There is almost 15% of vacancy in the national Commercial real estate market. Economic activity in India is fairly concentrated in top 8 cities. Currently, there is limited scope – if one wishes to pursue growth in tier 2 and 3 cities. In my views it will take a 2-3 years or more for the infrastructure development to reach small towns and districts and that would be a perfect time to pursue that opportunity. Till that happens, it is difficult to conceive a thriving Co-working business outside of main cities.
- What is The Office Pass (TOP) expansion plans?
TOP is a leading Coworking company in India that currently runs 14 offices across Gurgaon, Noida and Delhi. Over 100 companies are using our offices. TOP business is EBDITA positive and growing at over 100% per annum. Over the next 3 years, TOP intends to expand to 100 offices in 7+ Indian cities with over 1000 companies as customers.
