Co- Working Spaces – Key to Post- Covid Office Expansion Strategy

Now that  Covid is receding rapidly, many companies are asking employees to return to work but are finding it difficult to manage this transition. In this situation, employers are finding Coworking as an economical and effective alternative to a traditional office space. The Coworking segment has its biggest opportunity of the decade. In fact, in my opinion “COVID has done to Coworking, what demonetization did to Fintech”.

After two years of lull and doom, life seems to be almost back to normal. Industry estimates suggest that Coworking operators are already registering some huge gains in terms of the number of seats. The industry has not experienced such a growth. Many trends have emerged during the COVID period which are leading this tailwind in favour of Coworking. Let’s look at some of these trends.

Category A companies and MNCs have seen their productivity stagnate for almost two years. These companies are under pressure to moderate cost to stay competitive. They are looking at all expenses including office operating cost – which is the third biggest cost for any company. Category A companies are moving away from traditional long-term leases to more flexible workspaces. By doing so they are not tied-up in lock-ins of 3-5 years. Moreover, they get flexibility to increase or reduce capacity in line with their business dynamics. This cost-conscious behaviour is similar to that of a mid-size company that is continuously looking at cost optimization.

Companies have realized that they are unable to achieve desired employee productivity and social connect in the WFH scenario. This is on account of multiple factors including Indian joint family system; small size of Indian houses; lack of suitable work area; stigma associated with WFH; poor connectivity and blurring timelines between work & personal life.

As competitive intensity picks up  among Indian companies, the ones with WFH stands to lag behind. To prevent this productivity loss, companies are allowing employees to work form a Coworking office close to their place of residence. This practice, is popularly known as “Neighbourhood Coworking“. Employees are able to reach office without the use of public transport which prevents the spread of virus making it a win-win proposition. The concept of Neighbourhood Coworking is likely to get amplified over the coming years as most people realize the additional advantages of working from near home.

It is widely expected that mid to large size companies will move away from large centralised office operations to distributed workspaces to ensure business continuity in the wake of any virus related disruption. Shutting of a centralized office can lead to loss of revenue and momentum. Companies are actively considering moving from large offices to de-centralised or distributed offices to prevent such incidence.Since it is  impractical for each company to open 4-5 smaller offices in different parts of each city; they  are relying  on Coworking operators to provide this service.

As a result of the recalibration of offices and employees wanting to come back, Coworking spaces offer an easy way out to corporates. Neighbourhood Coworking spaces have an advantage here: these  spaces save costs, boost efficiency, offer some great work experience and flexibility to employees. Hence, several companies have already signed for spaces at Coworking centres.

There is a saving of 18-20% on office operating expenses just by moving from a traditional office to a Coworking space. Although Covid has caused massive disruption in the commercial real estate segment, it is likely to be long term positive for the Coworking industry which is likely to grow handsomely in the post pandemic scenario. Managed offices, distributed offices & affordable pricing are likely to drive a strong trend in the post pandemic period.