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Co-working space rentals firming up to pre-Covid levels

Abhishek Law | Updated on: Mar 10, 2022
Demand for co-working spaces expected to go up as more employees are called back to office and hybrid work models gain popularity.

Demand for co-working spaces expected to go up as more employees are called back to office and hybrid work models gain popularity. | Photo Credit: ANUSHREE FADNAVIS

Tier-II markets witnessing traction

Co-working space rentals have gone back to pre-Covid levels driven by short supply coupled with an increasing demand from Tier-II markets. Price corrections, an 8-10 per cent upward movement, is expected in the coming quarters as “back to office” picks up and hybrid work models gain popularity, says Amit Ramani, Founder and CEO, Awfis, the country’s largest co-working space provider.

Segment rentals have averaged out to ₹9,000–₹10,000 per seat per month on a pan-India basis; with some micro-markets witnessing rise in rentals. For instance, a short supply in the prime Bengaluru market has led to firming up of rentals by approximately 20 per cent over the last few months.

“Post-Covid wave 1 and wave 2, we had people approaching us for discounts or lowering of rentals. But now rents are firming up to pre-Covid levels. And in another few months, we are anticipating an  8-10 per cent increase driven by increased demand,” he told BusinessLine.

In the Gurugram micro-market, the rentals have firmed back to ₹6,000–₹7,000 per seat per month; up from the sub-₹6,000 per seat per month levels.

Demand continues to be strong across segments which range 15-500 seats. While SMEs look at 10–100 seating options, start-ups look for anywhere between 50 and 60 seats.

Awfis, which has a portfolio of about 5 million sq ft of space across over 120 properties (mostly under straight lease, rent-sharing or profit-sharing models); and it includes over 70,000 seats. The portfolio is spread in an 85-15 ratio between Tier-I and Tier-II locations.

Tier-II demand

According to Ramani, hybrid work models have already given rise in demand for co-working spaces in Tier-II markets. Coming on the back of a lower base, growth in these markets are faster at the moment.

Awfis, on its part, is adding spaces in new smaller markets such as Chandigarh, Lucknow, Coimbatore, Indore, Bhubaneswar, Jaipur and Nagpur.

“There are some people who have moved back to their hometowns and now prefer a flex work space there. Hence, we see improving demand in larger Tier-II markets,” he added.

About 30 mn sq ft office space in India are occupied by co-working or flex players and a large share of this is occupied by start-ups, say sources.

IT and ITeS continue to be amongst the main drivers of flex or co-working space in India.

Listing plans

Awfis, Ramani said, would look at going public over the next couple of years as it expands its presence to nearly 200 properties. It has been EBITDA positive since 2018, with EBITDA being in the 7-8 per cent range.

“Ideally, we would look at a presence across 200 sites and an EBITDA level of 20 per cent in the next two years, before taking the company public. Our burn continues to be small since we are an asset light model, that is, we do not own the properties ourselves,” he said.

Published on March 10, 2022
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