| |August 20199In Bengaluru, which is a leading commercial real estate market in South India, 1.2 million sq. ft. of space was leased out to organisations for co-working spaces in the first quarter of 2019. Only 0.2 million sq. ft. had been leased out in the same period the previous year in Bengaluru. Other south Indian cities including Hyderabad, the capital city of Telangana, made its mark in the co-working space market in the year 2019. Co-working players in Hyderabad leased out 0.7 million sq. ft. space in between January and March 2019. The space leased out for co-working offices in Delhi-NCR and Chennai increased to 0.3 million sq. ft. from 0.1 million sq. ft. During the first quarter of 2019, operators in Pune leased out 0.2 million sq. ft., which was at par with the corresponding period in the previous year.The future of co-working spaces in India looks bright, since organisations want to cut their capital cost and keep their leases short. For organisations such as startups, newly established small & medium enterprises (SMEs) and successful medium enterprises, renting and maintaining large office spaces with long-term leases and fixed capital investments places a huge burden on operational costs. These organisations should invest their first few years of operation in core activities which also require significant capital investments. However, co-working spaces provide these companies with viable options for renting offices in prime central areas of cities in a flexible manner at low costs.However, large corporate houses are also expected to move out of traditional and exclusive office spaces to shift their employee to co-working environments. Branded corporations might take up a larger number of seats as compared to start-ups in co-working spaces. Customised services and innovative technology for enterprise solutions would be of emphasis for taking co-working spaces on the lease that will ensure healthy levels of occupancy rates.There are more than 100 branded coworking spaces operating in India at present and this number is expected to expand by more than four times in the next three years. Occupancy levels have been 90+ percent for most of the branded operators while non-branded operators have witnessed occupancies in the range of 80-85 percent. In the upcoming years, flexible space is unlikely to be limited to office buildings only in cities, operators would move to retail spaces as well for developing co-working environments. Co-working operators across various cities are now eyeing under-occupied and under-performing shopping centres as well as mixed-use developments for developing shared environments.In the future, co-working spaces are expected to rake in better returns on investments for developer, landlord, and investors alike. The potential demand for co-working spaces in major cities of the country is very high at present, but the supply of well-managed facilities is very low. This can ensure a steady high occupancy for whosoever enters the market with a co-working property. The developer has the liberty of flexibility in deciding the best suited combination of open desks, closed cabins, meeting rooms, conference rooms, or cafeterias depending on the clientele in any location. Rentals of coworking spaces could be renegotiated every year. This provides the option of escalation in rental value of any particular property as compared to the conventional leasing model. Occupiers generally prefer to expand in the same property once team size grows thereby minimising the potential of losing clients. In addition, co-working spaces generally become financially self-sufficient after a few years of operation and as occupancy crosses the 50 percent market. CO-WORKING SPACES PROVIDE COMPANIES WITH VIABLE OPTIONS FOR RENTING OFFICES IN PRIME CENTRAL AREAS OF CITIES IN A FLEXIBLE MANNER AT LOW COSTSNakul Mathur
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