Leasing by co-working operators to rise 42% in 2021: Savills India

The total leasing by co-working operators is expected to increase by 42 per cent in 2021 at 4.9 million sq ft over 2020 with shared offices likely to gain greater significance in the post-Covid world.

According to a report on co-working spaces, ‘Collaborative space in dynamic world order’ by Savills India, “As organisations reassess their overall office space requirements and look for workplace flexibility in the wake of the pandemic, co-working operators will reposition themselves and continue to drive the commercial real estate market of the country.”

In 2020, co-working players are expected to lease around 3.4 m sq ft. accounting 11 per cent share of the total office leasing market. Although the overall leasing activity is expected to reduce significantly in 2020 as compared to 2019, it is expected to increase steadily over the next two years. The share of co-working space take-up in overall office leasing activity is poised to rebound to a 15 per cent share in 2021, similar to the 2019 level.

Over 3,000 co-working centers across the country are likely to offer approximately 1 million desks by 2022. Additionally, leasing activity by the co-working segment is expected to grow by 29 per cent during 2015-2022.

India has relatively larger co-working formats spanning about 50,000 sft compared to world average of 7,000 sq ft, the report said. In 2020, as of Q3, Bengaluru and Hyderabad had a combined share of approximately 66 per cent of the total leasing activity in the co-working segment. The overall stock, expectedly, has been highly concentrated in these two cities, and approximately 51 per cent share is expected by 2020-year end.

Co-working in India has grown from having a 5 per cent share in 2016-17 to about 15 per cent in 2019. Although the pandemic related uncertainty in commercial office market has impacted the growth trajectory in 2020, it is still expected to contribute around 10 per cent of the overall leasing activity in 2021 and 2022.

Separate asset class

Arvind Nandan, Managing Director, Research and Consulting, Savills India, in a statement said: “Over the years, shared office space has emerged as a separate asset class bringing significant cost-advantages to occupiers. A wide rate spectrum combined with hassle free operational services on offer, have been instrumental in increasing the affinity of mid-sized firms as well as large corporations towards coworking spaces.”

The pandemic could possibly lead to an array of trends in the co-working segment including the rise of marketplace platforms with sectoral expertise in flex spaces and increased consolidation with large investor-backed operators weathering the storm successfully. Co-working operators are also expected to tap into residential and retail market offering an integration of retail centers and office spaces.

Naveen Nandwani, Managing Director - Commercial Advisory & Transactions, Savills India, said: “The outbreak of Covid-19 has changed the rules with social distancing and de-densification of workspace becoming imperative. The flexible workspaces will reinvent and reposition themselves, emerging stronger on the other side of the pandemic.”