Anywhere office

UK-based online education company Leo Learning is setting up office in India. While Mumbai’s Lower Parel business district is perfect for it, the fledgling unit cannot afford the high rentals. Its Country Manager Amish N Engineer has a solution. He works out of a swanky office at the Peninsula Business Park, but pays only for his well-furnished private workspace, including internet connectivity, electricity, and the services of office aids and a receptionist. This works out cheaper, and every three months he renews his contract with Regus, the company managing the office space.

Luxembourg-based Regus specialises in serviced and shared office spaces, which are eagerly lapped up by a host of start-ups, entrepreneurs and multinational firms that are looking for ways to save on expensive real-estate and housekeeping costs.

One for all

“This format allows us to use common services and be mobile at the same time,” says Amit Goenka, CEO of private equity firm Nisus Financial Services. “The private equity business is dynamic and requires frequent travel. Most of the work is intellectual and there is no need for large physical infrastructure.

When travelling within India or abroad, he can use any of the 1,800 business centres operated by Regus in 101 countries. Goenka’s arithmetic is simple: “If you have a 20-member team in one place for a long period of time, it makes economic sense to own the facility. For fewer people, a shared office works best.”

Imperial ServCorp, ApeeJay Business Centre, DBS Business Centre and Stylus are some of the other major companies offering shared office spaces.

This model is equally suited for those who work from home. A receptionist, whom they share with several other companies, can transfer their business calls to London or Singapore or anywhere else in the world, giving them an official address and phone number for communications. And when they have to hold a meeting, a room can be booked at any business centre.

“People and companies are increasingly looking for flexible arrangements as they don’t want to park resources in real estate,” says Sahil Verma, COO of Regus.

Delhi’s Connaught Place, for instance, is the world’s eighth-costliest office destination at a monthly rent of ₹414 per sq ft, according to a report released earlier this year by consultancy firm Cushman and Wakefield. Bandra Kurla, in Mumbai, is next in the India list, at ₹285.

India sharing

“We entered in 2004 because we saw a huge opportunity here. We thought we could disrupt the market and have been proved right,” says Verma.

As its revenues doubled in India over the past three years, Regus confidently added 25 new offices, and now has 50 business centres in 12 cities across the country.

Australian office-space major Imperial ServCorp entered in 2008 with a franchisee arrangement with the real-estate firm K Raheja Corp. While the Raheja group provides the real estate, ServCorp sets up and operates the shared offices.

“In India, the demand is picking up,” says Taranviir Kaur, Imperial ServCorp’s India head. The company with 150 serviced offices worldwide has two centres in India. “We have broken even. We plan to have six to seven more centres in the next two years,” she says. On her list are Pune, suburbs in Mumbai, Chennai, Bangalore and the National Capital Region.

Global connect

ServCorp gives all its clients access to its portal. “They can pass on any instruction to us through the website,” says Kaur. So, for instance, if a client is boarding a flight, he/she can share this information on the portal and ensure that no calls are diverted to them during the flight.

With their wide network of centres across countries, the shared-office service providers allow clients to book rooms within minutes for a meeting, whether in Dubai, Singapore or London.

Little surprise then that with such conveniences, even MNCs are increasingly opting for serviced offices when expanding operations rather than invest in creating one. Intel, IBM, Twitter, Apple, American Express, Fujitsu, Morgan Stanley and JP Morgan are among the MNCs using serviced offices.

“Since liberalisation, MNCs have been making a beeline to India. While studying the market, and even after setting up initial operations, they continue to use these (shared) services,” says Pratik Das, Senior Property Manager at ApeeJay Business Centre, which has offered shared office spaces since the late 1990s.

Even after moving into owned spaces, some MNCs continue to use the serviced and shared spaces as satellite offices. Das says this not only saves costs but also helps the multinationals expand faster.

So when Twitter entered the Indian market, it operated from Regus’ network of shared offices. This helped it save time and capital. “Twitter has signed global terms with Regus. Every time they want to expand to a new location, they move into a ready Regus office,” says Verma. Twitter and other MNCs declined to comment for the story.

The shared-office arrangement is especially suited for MNCs that frequently downsize staff and have a sales force that’s mostly on the field. “If they build own spaces, they end up becoming property managers. To focus on their core business, they prefer to pay on use-basis than block the property,” says Verma.

Anuj Puri, Chairman and Country Head of property consultancy JLL India says shared offices are an excellent way of managing investment risk, even as they offer a cost-effective and flexible solution to start-ups, companies that wish to expand cautiously and those that have no long-term plans.

Robust revenue model

Industry estimates peg the cost savings from a shared office at 30 to 50 per cent vis-à-vis an independent office.

And while the serviced-offices cut costs for others, their own revenue model is robust too. Space is usually taken on a long-term lease from a landlord, and the offices built in various sizes are let out for short durations — from three months to three years. “We pay rent to landlords. It is an asset-light model,” says Verma.

The business centres usually charge per seat. In South Mumbai, for instance, shared offices typically charge ₹20,000 per seat per month while in NCR’s Gurgaon, it is ₹10,000-14,000. “The rates are adjusted to inflation. The pricing depends on the demand and supply,” Verma says.

With the various permutations and combinations, clients have access to a bouquet of services at varying charges. A meeting room with videoconferencing facility, stationary and unlimited refreshments costs ₹1,600 per hour in Lower Parel, while a plain vanilla meeting room can be hired for ₹800 an hour. Access to a business lounge again comes for varying rates, depending on the number of days.

Cookie-cutter advantage

A major advantage for the serviced-office providers is the economies of scale. “Because we have done this (created office spaces) in 1,800 locations, we are able to optimise space to use the floor plan most efficiently,” Verma says.

ServCorp’s Kaur points to the company’s globalised operations. “We either procure furniture and other office accessories globally or get them locally made according to our standard international designs,” she says. As they build offices in multiple locations, the business centres will naturally enjoy more competitive rates compared to a company building an owned space in one location.

However, while the cost and speed of operations are great news for start-ups, on the downside is the absence of branding. Regus and ServCorp, for example, don’t allow clients to display their logo or brand name.

“Shared services office-spaces do not offer scope for customisation or visible company branding as leased or owned office spaces do. Also, they obviously do not count as a company’s assets,” says property consultancy JLL’s Puri.

But that is perhaps of not much concern to a start-up still finding its feet. And an MNC with global-level recall will hardly miss its logo outside yet another cabin, especially one that is invaluably saving money.

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