Office-Averse Employees Give A Lifeline To Coworking Spaces In Smaller Cities

Reverse migration, cost benefits and affordable office rentals are accelerating the adoption of flexible coworking spaces even in Tier II and Tier III cities
Coworking spaces
Coworking spaces

The Covid-19 pandemic has made two things abundantly clear—work can be done from home albeit not in the most comfortable of ways and employees are reluctant to jump right back into the grind at the physical office. 

This dilemma was aptly reflected in the findings of Microsoft's first annual India-specific work trend index released in 2021. The survey found that nearly 74 per cent of Indian employees wanted more flexible remote work options while 73 per cent craved more in-person time with their teams. 

There, however, is a middle ground that seems to be gaining popularity—flexible coworking spaces. The trend is increasingly pushing the niche set of workspaces with its new-found prominence to move beyond the metros and experiment with the smaller cities as corporate India is being compelled to provide staffers with the flexibility to work whenever and wherever they want. 

As many enterprises plan their expansion in Tier II and Tier III cities, flexible workspace providers, including IWG, WeWork and Awfis, are tapping into the growing demand to cater to the diverse needs of customers there. This move has upended the widespread presumption that coworking companies would find themselves boxed into a corner in a post-pandemic world as concepts like reverse migration, distributed workforce and work near home or work from anywhere have now come into play.

During the pandemic, the hybrid work model emerged as a formidable new force on the Indian office real estate market, says Anuj Puri, Chairman, ANAROCK Group. "There was a gradual but significant transition to flexible spaces that offer businesses and employees the agility to continue operations seamlessly. Coworking spaces have become the most preferred option to adopt the hybrid work model as compared to the other options of changing office layouts or the hub-and-spoke model (in which one hub acts as a centre)."

In a report, recruitment and staffing company CIEL HR Services highlighted a 30 per cent rise in hiring talent from a company's non-office locations as companies sought to take work to people rather than having it the other way around. Additionally, organisations that are reopening their offices do not want to compromise on the workspace experience for their employees, regardless of where they are located.

Case in point: GoFloaters. The coworking space recently collaborated with Chargebee Technologies, a Chennai-based SaaS company that wanted to provide its employees with an option to work near home as part of its adaptive workplace model. GoFloaters’ WorqFlexi program allows Chargebee’s team members to huddle in person at meeting spaces across six Tier I and Tier II cities. It also gives the company’s management team the ability to provision, monitor, and manage the usage of spaces by their teams and constantly learn what their employees want. 

Small Cities, Big Opportunities

Another emerging aspect is that many professionals who moved to their hometowns or smaller cities during the pandemic are now unwilling to return to the metros and Tier I cities. This is where flexible working spaces in those smaller cities can come to the rescue.  

As per a joint report by Colliers and Qdesq, the flexible workspace stock is expected to cross 60 million sq ft in metro and non-metro cities by 2023 as occupiers embrace agility and flexibility in their work models. Most of the significant transactions, however, are still happening in the urban areas of Mumbai, NCR, Bengaluru, Pune, Hyderabad, Chennai, Ahmedabad, and Kolkata.

Interestingly, the survey findings also showed a real-time high demand that coworking spaces are witnessing in Tier II and Tier III markets which allow offices to optimize costs while ensuring employee retention by allowing them to work from their hometowns. 

Harsh Binani, co-founder, Smartworks, says that the company recently launched its centre in Jaipur and is exploring more Tier-II cities like Kochi, Coimbatore, Indore, Ranchi and Ahmedabad. "Many of our existing clients have signed multi-city deals with us and some also want to foray into these emerging markets," he says.

In January 2022, New Delhi-based Awfis reached the 100-centre milestone and is aiming to double its capacity this year by expanding in the emerging Tier-II cities like Lucknow, Nagpur, Bhubaneswar, Kochi, and Jaipur, alongside metros. Amit Ramani, founder, and CEO of Awfis Space Solutions, claims that the company would cross the 150-centre and 90,000-seat mark by the end of May 2022.

One Space Fits All

In the new normal, managed offices are the most lucrative option as they fit well to fulfill geographical diversifications as companies do not have to build up workplaces from scratch in different locations. 

Binani points out that this option allows flexibility, agility and cost savings, both for employees and employers. Enterprises are exploring satellite offices and are open to divesting their office spaces to avoid unwanted long-term commitments and capital expenditures. "Premium facility management and de-densification have led enterprises to consider managed offices as they have become crucial to their return-to-work strategy," he says, adding that companies are diversifying operational risks by distributing work at more than one location, offering maximum flexibility to their employees.

Coworking spaces offer numerous benefits like lower fixed costs, customisation, flexibility to scale up and down and, most importantly, access to a community culture, collaboration and networking. In line with this trend, large corporates are increasingly partnering with coworking spaces for a win-win situation. 

According to Ramani, over the past couple of years, satellite offices managed by flexible space operators have emerged as the optimal solution for many businesses, but, more importantly, among small and medium enterprises. "The need for a countrywide network has expanded the ability of coworking spaces to provide multiple-location services. Several factors like control over expenses, flexibility in lease terms and allowing the workforce to work from anywhere have enabled organisations to be location agnostic and therefore, foster the concept of satellite offices," he elaborates. 

Coworking major WeWork introduced the 'Managed Office by WeWork' programme which offers custom-built office spaces managed by it to clients while maximising economies of scale through an asset-light portfolio and eliminating overhead costs.

"There has been an increase in the average commitment term due to the 'Managed Office by WeWork' deals. We signed three such deals in Q1 2022 spanning around 74,000 sq. ft. with brands such as MSD and SimpleEnergy," says Karan Virwani, CEO, WeWork. The company also launched 'WeWork On Demand', a one-day access pass to any of its 38 buildings across six cities.

Virwani also notes that working from home is frequently associated with blurred boundaries between work and life and insufficient infrastructure. Furthermore, with more time spent indoors, the opportunity to engage and collaborate with coworkers is limited, which has prompted the need for companies to shift to a hybrid working model. "Today, employers are prioritising safe and hygienic practices and the benefits of flexibility and lower upfront costs arising from stand-alone establishments," he points out. 

According to real estate services firm Cushman & Wakefield, flexible workspace operators expanded their portfolio aggressively last year. They took on a lease of 21 per cent more office areas across the top eight cities to meet the rising demand for flexible workspaces from corporates amid the Covid-19 pandemic. At Awfis itself, the demand for seats has gone up 5x as compared to pre-pandemic levels. A few years ago, Ramani notes, the coworking industry only occupied 25 million sq. ft. of commercial real estate in India. Today, it is touching close to 55 million sq. ft. "This is largely fueled by the rise of entrepreneurship in the country, massive infrastructure developments in Tier II markets and demand for collaborative spaces," he adds.

Despite a slowdown in commercial real estate absorption, WeWork, too, saw a strong revival in demand last year, leasing more than 1.7 million square feet of office space to large enterprises and smaller firms. 

"Our new member acquisition has also shown rampant growth with our new member base almost doubling on a month-on-month basis. We recently signed an enterprise deal with e-commerce platform Meesho, an 18-month long-term contract to expand from 4 to 700 desks," says Virwani. WeWork’s other enterprise deals include 3M, Colliers India and Tata Play Broadband. With a sale of over 10,000 desks and a total occupancy of 80%, Q1 2022 was one of the most successful quarters for the company, making it WeWork's first profitable quarter since its Indian debut in 2017.

Future trends make flexible spaces an integral part of workplace strategy, with several projections pegging it to be over 30% of the overall commercial real estate market by 2030. Optimistic about the segment's growth, Smartworks says that it added over 3 million sq. ft. of space last year and is planning to add another 3 million this fiscal year which will take its overall portfolio to 10 million sq. ft.. Currently, it has a growing footprint of over 7 million sq. ft. with a presence in 11 cities and 37 centres. The company is looking to touch a Rs 1000-crore top line—a 3x revenue growth over last year's Rs 350 crore—by FY23.  

The democratisation of workplaces has overtaken the old thought process of rigid cubicles and linear hierarchies. With increased awareness, the demand for flexible spaces will only gain more prominence amongst corporates, start-ups, small and medium enterprises, employees and individuals not only across metros but also Tier-II and Tier-III cities. 

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