Value added services to become key attraction at flex workspaces
It’s no longer simply the space at the coworking spaces which are attracting occupiers instead the services which are emerging as a differentiator. From offering standardized services such as furnished office space, high-speed internet, telephone lines, and office equipment, the coworking industry has been dabbling with various value added services to support small businesses and startups while making efforts to attract and retain occupiers, leading to further popularity of this model. These range from additional IT services such as cloud, to allied services such as legal and accounting services, marketing tools, and insurance.
According to international property consultant Savills International, coworking spaces will account for roughly 20% of the total office leasing across India’s six major cities by the end of 2022. This rapid growth in coworking necessitates the need for bringing in differentiation to solve areas that are essential for the successful operation of a business.
A win-win for everyone
Every small business or startup needs at least 10-15 major services such as IT peripherals, accounting, insurance, and events essential for its smooth functioning. Managing multiple vendors becomes a complex and time-consuming task. This also means multiple agreements and payment schedules which diverts resources and consumes the precious time of employees. With coworking spaces, occupiers can avail of all these benefits at the click of a button and under the same contract, thereby reducing complexities in managing allied activities of running a business.
Furthermore, the availability of allied services under one umbrella also means faster conversion of activities, thereby bringing more efficiencies. And with the democratization of these services, which emerging companies themselves usually offer, occupiers get the benefit of cost efficiencies and reduce their overhead costs. Occupiers usually have a pay an additional 20-30% charge for value added services over and above their rental cost, which is still cost-effective considering availing these services individually would cost significantly more. As the associated benefits far outweigh the costs, an increasing number of occupiers are opting for coworking spaces offering value added services.
Path to profitability
With the rapid expansion of co-working spaces across the country, establishing a path to profitability becomes supremely important for these companies which are backed by domestic and global investors. The introduction of value added services will play a critical role in shoring up the revenues instead of simply relying on rental income. According to news reports, income from value added services is currently accounting for about a fourth of the total revenues from about 10% about half a decade ago, validating its importance in companies’ profitability journey.
The no-frills model of services offered by coworking players enables the occupier to pick relevant services from the lot instead of opting for bundled packages from a third party which becomes a drag on their overhead costs.
Exposure to new service providers
In a market dominated by traditional and global giants offering a range of services, it becomes difficult for new-age service providers to create a niche for themselves. With coworking players, these new-age companies are provided access to a set of clients open to availing of their services which enables them to reduce their customer acquisition costs. This shop-in-shop model has been quite popular in retail and has been opening up new avenues for new-age service providers. This is a reflection of the ecosystem play of co-working players who are creating numerous opportunities not just for their customers but for allied business partners as well. As we look forward to the next decade of growth of coworking players, they are most likely to emerge as a dominant force in the industry and an incubator for several new-age businesses complementing the needs of occupiers.