It is not just Bengaluru. It’s Chennai and Hyderabad, too, that are driving co-working space providers down south. Whether because of startups, small and medium-sized enterprises (SMEs) or multinationals, business is clearly booming in the co-working real estate space in southern cities. It was only natural then that Gurugram-based Smartworks decided to open an 85,180 sq. ft., 1,500 seater co-working space in Chennai this Thursday, its second facility in the city in just three months. In May, Smartworks opened a 300,000 sq. ft., 6,000 seater co-working space in Bengaluru, its largest facility in India. Smartworks claims that 30% of the occupants in its Bengaluru facility were sold even before the launch.
"Chennai is fast emerging as a destination for information technology, outsourcing, manufacturing and enterprises, that has led to entry of global firms here. Our already functional facility in Guindy (its first in Chennai) was booked out 100% within two months of its launch which has led to the opening of this new facility," said Neetish Sarda, founder, Smartworks.
The co-working space provider’s latest facility in Chennai’s Old Mahabalipuram Road (OMR) area is placed strategically in the city’s IT corridor to attract the right tenants. At present, Smartworks has five facilities in the south, including two each in Bengaluru and Chennai and one in Hyderabad.
Besides Bengaluru and Chennai, Hyderabad is also a key market for co-working space providers. Over the last few years, Hyderabad has developed a vibrant startup and accelerator base in the country, besides being home to global technology giants such as Microsoft, Google, Apple, Facebook and Amazon, who have set up one of their largest technology development centres in the city.
Real estate consultants point out that large co-working players are mostly focussing on tier I cities and key metros to expand the business. The main concentration is in Bengaluru, Delhi-NCR, and Mumbai, followed by Chennai, Hyderabad, Pune and Kolkata.
In numbers: 75% of co-working space areas are located in the top three tier I cities led by Bengaluru, Delhi-Gurugram and Mumbai, according to data from CBRE, a commercial real estate services provider. Last year the co-working market in India was pegged at nearly 10 million sq. ft. and is expected to touch 13.5 million sq. ft. by the end of this year, noted a CBRE report.
New York-based shared workspace company, WeWork — which started its India operations in July 2017 — expects to double its locations to 20 from nine across Delhi, Mumbai, and Bengaluru by the end of 2018. WeWork India also plans to expand its base to Chennai, Hyderabad and Pune by next year.
In late 2016, WeWork announced its entry into India, through a joint venture with Bengaluru-based real estate developer Embassy Group. However, it started operations in July last year, with its first shared office space at Embassy’s Residency Road building in Bengaluru.
Not only established players, co-working startups continue to be attractive for investors to park their funds. In June, Bengaluru-based co-working space provider IndiQube raised funding of $15 million in a round led by WestBridge Capital. The co-founder of Helion Ventures, Ashish Gupta, also participated in the funding round. While in July ClayWork Spaces Technologies raised $250,000 from Nisus Finance. The company plans to utilise the capital to open new shared office spaces in Bengaluru.
The co-working office market in India is highly competitive and crowded. One of the world’s largest co-working space providers, WeWork, Luxembourg-based International Workplace Group (IWG), and several large local companies such as CoWrks, Gurugram-based Smartworks, Bengaluru-based BHIVE Workplace, Delhi-based Awfis Space Solutions, and Innov8 are ajostling for real estate in the office-space market.
However, Anuj Puri, chairman, Anarock Property Consultants, believes that there is immense opportunity for multiple players to leverage the growth of co-working spaces in India. "It is anticipated that by 2020, the demand for these co-working spaces is set to outgrow that of the traditional office space," said Puri.
According to data from Anarock Property Consultants, co-working space providers who have ramped up their presence in the market this year are Bengaluru-based InstaOffice, Delhi-based startup, ONE Co.Work, private equity firm Xander Group’s co-working office venture, The Hive and Skootr Global.
IWG operates about four business centres out of shopping complexes in Bengaluru, Chennai, Delhi, and Noida under its Regus brand. IWG has also recently opened a co-working office space under its SPACES brand at City Centre mall in Chennai.
Real estate consultants feel that shared-office spaces in prime locations provide a perfect platform for startups, SMEs as well as large corporates as they come at reduced costs, increase flexibility of working at multiple locations and with no fixed capital investment.
At the heart of all this is the tenant. Much like in traditional office space rentals, the mathematics of co-working spaces also need to work well for the tenant. Delhi-headquartered cyber security firm Lucideus Labs, for example, shifted into a large office which is a standalone building, because it “got a very price effective deal. "Plus, considering our line of business, it adds to the credibility and corresponding trust of customers when they visit a dedicated place of ours, especially for our headquarters," said its chief executive Saket Modi.Lucideus, however, uses co-working spaces in Mumbai, Boston, New York and San Francisco as it finds such arrangements to be extremely cost effective and a convenient way to get centrally located work spaces.
Clearly, tenants seem to have no shortage of rental options in the current market scenario, be it in Bengaluru, Chennai, Hyderabad, Mumbai or Delhi.
Co-working spaces providers are therefore, understandably, pulling out all the stops - from globally curated aesthetics to skill sharing sessions, parties to wine tastings and speaker evenings - to woo clients, both enterprise and entrepreneur.
For the moment, it seems, the client remains king.