Coworking industry in India enters a new phase: Maturity

By Published On: October 17th, 2023Categories: Coworking3.5 min read
coworking industry

Until five decades ago, an industry’s evolution used to pan out in several phases – from existence to survival, take off, and maturity – success used to happen over several decades. However, internet-led businesses today have turned the tables and are witnessing faster growth, hence switching from establishing business to maturity at a brisk pace. A case in point is the coworking inudstry in India which in a decade has mushroomed across the country and is witnessing an increase in occupancy levels, longer tenures, and healthy financials, a sign of maturing of business not visible in other spheres of the startup ecosystem in the country currently. Their adoption has significantly increased after the COVID-19 pandemic which led to companies across sectors enabling remote or hybrid work for their employees while looking at ways to reduce fixed costs.

The journey of pure play coworking space in India started around 2005 with a few thousand seats in comparison to 7.5 lakh seats across the country as of 2022 and is expected to grow to over 10 lakh by 2025, according to JLL. Starting its journey from an infrastructure provider, the coworking industry has truly emerged as an enabler of startups, small businesses, and freelancers while providing a cost-effective alternative for established organizations. These factors including economies of scale, value-added services, networking events, and maintaining fiscal discipline are helping the industry accelerate toward its maturity phase.

The Coworking Industry is now a pan-India phenomenon with Economies of Scale

What started as a metro-only concept today has become a pan-India phenomenon with coworking spaces now available in tourist destinations such as Goa and Jaipur to smaller towns such as Ranchi and Coimbatore. This mushrooming of coworking spaces, particularly by national players, is helping them achieve economies of scale, thereby rationalizing the input cost and fast-tracking their path to profitability.

By providing a Grade A office space with state-of-the-art amenities, coworking players have democratized the office space segment which was earlier the forte of established large organizations. Considering the high upfront cost, smaller players could not operate out of such offices. However, coworking players offering individual seats to freelancers, small businesses, and startups are able to shore up revenues due to affordable seats, short lease periods, and easy access across multiple locations, making it an ideal office space for occupiers.

Value Added Services shore up revenues

Running a business requires a host of support services – from essential services which include high-speed internet services and housekeeping services to value-added support in the form of cloud services, marketing tools, legal, accounting, and housekeeping services. All these services offered at the click of a button, under one umbrella are helping occupiers save on costs and from the hassles of subscribing.

Availability of these services also requires a single contract and simplified payments as against reaching out to multiple service providers and having separate legal agreements and payment terms which adds to the hassles of managing a business. These value-added services help the founders focus on their core business instead of spending time handling allied activities.

Networking its way to success

Coworking spaces are also emerging as fertile land for networking and collaboration while offering a viable revenue source for operators. By enabling occupiers to host events and reach out to their target audiences within the offices in lieu of a fee, coworking operators are able to complement their core revenue-generating streams with this value-added service, which is increasingly finding takers across geographies.

These additional revenue streams are helping the coworking industry significantly strengthen its ability to cater to customers’ evolving requirements while shielding itself from market shocks, making it even more attractive as a business. This growing popularity of coworking spaces is reshaping the commercial office segment in India, accounting for roughly 20% of overall space uptake currently as against a low single-digit a decade ago.

Therefore, the coworking industry has become the poster child of real estate in India and is among the top preferred investment options for developers, high net-worth individuals (HNIs), and family offices. As we look forward to the next decade of growth of coworking industry in India, the segment is expected to continue its expansion, and innovation and emerge as the biggest driver of commercial real estate in India.

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