Co-Working Space Concept Gathers Traction In India
WeWork India, a joint venture between US-based co-working space provider WeWork and Bengaluru-based property developer Embassy Group, is in talks with marquee global investors such as KKR, TPG, and Goldman Sachs to raise funds of over $100 million (Rs 640 crore).
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WeWork is the largest co-working space provider in the world. They have plans to invest $100 million over the next three to four years to open centres in major cities and they need funds for that.
According to the source, WeWork India could go for either debt or equity deals or do structured debt deals with private equity (PE) funds. “WeWork must have spoken to US-based funds as they understand its business better. It can also offload a stake in the business,” said an executive with a PE firm.
The company offers a tech-enabled platform, along with collaborative, community office space and services for budding entrepreneurs, small businesses, freelancers, and established companies. In March this year, global investor SoftBank invested $300 million in WeWork.
Co-working concept catching up in realty market
According to a report by global real estate consultancy and services company Colliers International, major co-working operators in India leased about 1.2 million sq. ft. in 2016, which accounted for just three per cent of the overall leasing volume in office space. This number could jump to 8–9 million sq. ft. by 2020, pointing out to the promising growth in the segment.
Some notable players in the co-working space arena in India include names like Awfis, Bhive Workspace, 91springboard and Cowrks.
While most of them are concentrated in Bengaluru, Gurgaon, Mumbai even Hyderabad are witnessing a growth in co-working spaces now. As the segment sees growth, even tier-two cities such as Pune, Ahmedabad and Kochi could also see emergence of co-working spaces.
“Though still very nascent, this category could prove to be a disruptor as bigger co-working players such as WeWork enter India and more such facilities prop up across cities,” said Ramesh Nair-CEO & Country Head, JLL India.
In terms of the number of seats available, around 9,600 are available at co-working facilities across the country.
Reasons co-working space gaining traction
Firms wanting to get more agile are open to housing their innovation teams in such facilities. Some client-centric companies look at making some of their key teams sit close to client sites. Bigger companies and corporates are slowly realising that collaborative work spaces with open areas can boost employee productivity and help attract as well as retain talent.
Sharing the space not only brings affordability, but also ensure an environment conducive for the growth of companies, network opportunities, etc.
“Companies can make savings of up to 20–30% by working in a co-working space. Additionally, they can avail benefits of a new-age workplace along with plug-and-play amenities which are at par with grade-A offices,” Sumit Lakhani, CMO at Awfis Space Solutions.
As the competition grows, co-working space providers will need to bring differentiation in terms of amenities and offerings. Given the inherent risks in running a co-working space, consolidation among co-working operators will occur, as not all of them will be able to mitigate the risk in their business models.