From the increasing demand for hybrid models to rapid development of Tier-II and III cities to technological advancements, the co-working and managed office space industry is set to reap the benefits of multiple tailwinds in the coming years, says Sanjay Chaudhary, Founder & CEO, Incuspaze. In an interview with businessline, Chaudhary shared his thoughts and insights on what awaits the industry in terms of both opportunities and challenges. Excerpts:
What has driven demand in the last year or so?
The demand for co-working and managed office space has rebounded strongly in the recent past as the workforce returns to the office and mid-to-large business operators embrace creative office space ideas. The causes driving demand in this sector are mostly tied to the increasing economic shift toward the gig economy, which has increased demand for flexible office spaces. Managed office spaces provide flexible pricing structures and inexpensive lease prices, which benefit businesses as they expand. Similarly, government initiatives that allow for tax breaks and subsidies are driving more enterprises to tier-II cities, resulting in increased demand for office space, particularly in Hyderabad, Ahmedabad, Lucknow, Indore and Kochi. In response to this, we have launched new office spaces in these cities to cater to this demand. Apart from this, the improvement of a city’s infrastructure, combined with technological innovation, has prompted firms to shift to managed office space, which helps to reduce total operational costs.
Will the industry continue to depend primarily on start-ups and MSMEs or do you see large corporates too embracing the model in a big way?
We see large organisations increasingly adopting the co-working concept in industries such as IT, manufacturing and BFSI. As per a report, India’s flexible space stock is predicted to exceed 80 million square feet by the end of 2025. Businesses have recognised the enormous possibilities that flex spaces offer for their operations, such as a centralised location, access to premium services, and flexible leasing alternatives.
Coworking spaces provide an upgraded experience that large organisations can enjoy without the responsibility of managing these resources in-house, with meeting rooms outfitted with superior audio-visual gear, high-speed internet connections and 24/7 access. At Incuspaze, we provide customised workspace solutions that are designed to match their specific needs.
In terms of sectoral share, do you see demand from new segments increasing and why?
We see the largest demand coming from the edtech sector. Because of the increased flexibility and customisation provided by the coworking model, an increasing number of edtech organisations are adopting it. We are also seeing traction from airlines and electronics companies that have recovered from the pandemic and are now focused on flexible workspaces to save capital investment and increase productivity in order to foster a dynamic work culture.
In the spectrum of services you offer – from co-working to managed workspace and everything in between – what kind of trends you see in terms of current demand and potential?
As the Indian workforce evolves, businesses are adapting to changing economic conditions that require flexible office solutions. It is estimated that demand will continue to see an upward trend in the coming years since many industry reports have indicated steady interest from start-ups to large corporations.
In terms of current industry demand, hybrid work models are driving the growth of co-working spaces to offer flexible membership and leasing options. In many cases, we have also observed emerging trends for specialised spaces catering to sectors such as healthcare, BFSI, and IT as alternatives to traditional offices. Additionally, we are witnessing growth in Tier-II cities including Hyderabad, Jaipur, and Lucknow, as businesses expand their operations and remote work gains traction.
Technology integration, which facilitates talent networking, access control, and workflow management for a better working environment, offers the expanding potential. Energy-efficient construction strategies and sustainability initiatives are used to draw in and support ecologically conscientious companies. Significant investment is also being made in the sector by both domestic and foreign businesses, which could result in consolidation and the rise of better-funded, larger operators.
Will the increasing adoption of remote working model pose a challenge?
The emergence of remote work may seem like a challenge for the Indian co-working space, but in reality, it’s creating fresh chances for growth and adjustments. We see it as a catalyst for the industry to rethink its value proposition, not a challenge.
Co-working facilities are starting to replace home offices as the go-to option for people who miss the social and professional ties that come with remote work. By emphasising community, adaptability and value-added services, the sector is flourishing in this new work environment. Thus, co-working space has a promising future in India by being at the forefront of the dynamic work revolution and innovating to meet shifting demands.
From a regulatory/policy perspective, what do you think will accelerate the growth of the industry?
The integration of technology into building models will undoubtedly accelerate the industry’s growth. As a result, any legal or policy changes that integrate and encourage the use of technology and automation will have a beneficial impact on the coworking industry’s future. Similarly, the growing popularity of green spaces that emphasise the use of eco-friendly technologies and renewable resources will encourage the adoption of sustainability practices, resulting in industrial growth.
What are Incuspaze’s targets in terms of turnover, office space inventory, expansion etc?
Over the past year, we’ve experienced a remarkable 3X increase in demand, particularly evident in Tier-II cities, notably driven by the co-working sector. This surge in demand has propelled our expansion plans, with an anticipated addition of 2.5 million square feet to our office space inventory by 2025. Our focus on Tier-II cities aligns with the trend identified in the latest CBRE report, which highlights the presence of over 26 major flex office operators across 10 such cities. In the Jan-September 2023 period alone, office absorption across these cities reached 1.6 million square feet, indicative of the burgeoning opportunities in these markets.
With expansion plans in cities like Jaipur, Pune, Coimbatore and Bhubaneshwar, we aim to capitalise on this regional growth while contributing to the overall infrastructure development.