Shipra Goel and Sunil Agarwal

Co-working Office Spaces in India –A Business Viability Study of Delhi/NCR Co-works

• Co-working spaces are shared offices that typically have open space and offer desk space as well as other facilities such as administrative help or services such as couriers or secretarial service.

NASSCOM Start-up Report

• Co-working space is a flexible, ready to use, plug and play office sharing arrangement where people from different professional backgrounds, interests and companies work in the same place together.

What is a Co-working space?

Who uses Co-working Spaces?

Small and Medium

Enterprises

Freelancers –Researchers/

Designers/ Writers

Remote Workers

Entrepreneurs Telecommuters/ Travellers

Anyone Seeking Work Flexibility

Why use a Co-working space?

Work Flexibility

Networking Opportunities

Social Interaction with like-minded

people

Fun and enjoyable

atmosphere

Basic Office Infrastructure

Private Office Space

Space Sharing, Community,

Collaboration, Connections,

Creativity

• Office Address• Dedicated Space • Less Disturbance• More Productivity• Security• Zero Facilities Management

• Furniture - Desks• Fast internet• Electricity• Shared Resources• Meeting Rooms• Printers, Projectors, Fax• Food and Drinks• Concierge Services

• Sharing Knowledge, Ideas• Making Connections• Winning New Clients• Community Building• Creativity and Innovation• Events and Workshops• Work from Home people

seek Human Interaction• Open-minded/ fun Culture

• Flexible Seating• Flexible Rentals/Plans• Flexible Office Timings

Demand Drivers for Co-working Spaces in India

Service Providers/

Space Operators

Landlords

GovernmentEnd Users

Co-working Ecosystem in India

Co-working Survey Details – Delhi NCR*

*Delhi NCR :

Co-working Space Revenue Streams

48%

30%

6% 6%5%

2%1% 1% 1% 0%

0%

10%

20%

30%

40%

50%

60%

Desk Rent with

WiFi

Private Office

Rent (Dedicated)

Meeting Rooms

Rent

Event Space Rent Food and

Beverage

Desk free Virtual

Membership

Tickets to

Workshops/

Events

Photostat and

Printing

Any other

(concierge)

Mentoring

Support Fees

Revenue Contribution (%)

Co-working Space Cost Break-up

32%

26%

16%

7%5%

3% 3% 3% 2% 1%0%

0%

5%

10%

15%

20%

25%

30%

35%

Space Rent Co-Founders

Salary

Office Staff

Salary

Technical and

Office

Equipment

Depreciation

Electricity Food and Drinks External

Marketing, Social

media

Internet Event

Management

Maintenance

(Cleaning,

Repair of ACs,

Printers,

Photostat

machine etc.)

Management

Software, if any

Cost Break-up ( %)

• 21% of the Co-working spaces interviewed in Delhi NCR have claimed to reach break-even point within 6 months of operations. These spaces were observed to be owned by the co-founders, hence rent, significant cost head was removed which contribute to early profitability

• Study says that majority of the co-working spaces become profitable within one year. Good location- accessibility and right pricing of the space contributes to maximum occupancy and hence early break-even

• 11% of the spaces which took above 2 years to break-even are either disconnected from public transport or are highly priced and could not deliver superior user experience.

Co-working Spaces Break-Even Time

21%

32%

26%

5%

11%

5%

0%

5%

10%

15%

20%

25%

30%

35%

Within 6 months 6-12 months 12-18 months 18-24 months Above 24

months

Don't Know

Responses for Break-Even Time %

Challenges Importance by Space Operators

8.78.3

7.7 7.7

7.0

4.7

4.0

3.02.7

1.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Location of the

Centre

Admin Tasks High Rental Cost Marketing for

New Members

Technical Issues Space

Maintenance

Building

Community

Managing Noise

Levels

Privacy of

Customers

Organizing

Events and

Workshops

Importance Rating Given By Space Operators

Features Preference Given by Users

9.2 98.7 8.5

8 87.5

7 6.96.5

5.5 5.35

4.74.2 4

0

1

2

3

4

5

6

7

8

9

10

Importance Rating Given by Users

Industry Call Outs Supporting Co-working Trends in India

“Over time, co-working spaces are going to transform the way businesses is done in India”-

Ritesh Malik, Innov8 Coworking

“24% of all the startups in India are from Delhi. At Innov8, we are not focusing on the office

spaces, which we provide, rather office spaces are just 10% of

our business, and 90% of our focus is on

community building-Ritesh Malik, Innov8

Coworking

User Engagement through focus on Community Building is the Game

Changer

Co-working spaces are open to all, Innovative atmosphere maintained

through screening process sometimes

Co-works Like SproutBoxin Gurgaon conduct an application screening process before allowing applicants to be a part of the ecosystem. The reason for this process is to attract the most intellectual and innovative minds and maintain the atmosphere

WeWork, Global Player

coming to India in July

2016

Industry Call Outs Supporting Co-working Trends in India.. Contd.

Co-working spaces in India are bridging the gap

between an Apartment and a Business Centre

The highest demand for Co-working spaces in India is witnessed in start-up hubs such

as Bangalore, Mumbai, Delhi, Pune

and Hyderabad-Ravindra MK,

Cofounder – BHIVE Workspace, Bangalore

Thriving start-up

ecosystem boosting

demand for Co-works

Co-working spaces are as comfortable as

home but at the same time it lets you operate

with maximum efficiency with less rigid environment

Three super critical differentiators for Co-working spaces in India are:Location, User Experience and

Affordability –Vikas Lakhani , Co-Founder –

Instaoffice, Delhi

User Experience and Right Pricing are the

Success Factors

Co-working space operators are marketing more than just desk space. Selling points include the intangible qualities of working in a creative space which offers flexibility, communal interactions, invitations to events, access to ample networking opportunities and additional services like mentoring and incubation support

Basic Services are packaged differently. WIFI connection, power, IT facilities, Fax machines, projector, printers, phones, scans, whiteboard, paper, furniture, conference rooms, break-out areas, recreation rooms, water, tea, coffee and snacks are basic services. These are packaged as a combined plan or separately charged for each service with various membership plans like Part-time, Full time, Weekdays, Flexi plans etc.

Major Shake-up awaited in this space. Currently, large number of Co-working spaces are mushrooming all over India without understanding the user dynamics. Industry is due for a major shake –up, where consolidation will take place very soon and the ones unable to leave an impact or differentiate will be forced to shut-down.

3 key success factors for Long Term Profitability and Value Creation

Right pricing - Co-works are priced anywhere between 3,000 INR per seat month to 45,000 INR per seat per month suiting all kind of user profiles depending on location, services provided and user experience. Indian market is price sensitive, expects the price to be 30-40% lower than traditional office space. Ideal or sustainable pricing recommended to be between 8000 INR – 15,000 INR per seat per month.

Location: Accessibility is super critical in India with increasing logistics problem as people don’t want to travel far for work.

Superior User Experience – User experience and user engagement at emotional level through community building activities like celebrating festivals and birthdays create long term value and ensure that users stay for longer periods

Co-working spaces in India currently poor on functionality. Emphasis should be on creating a long term economically viable and efficient model for both Users and the Landlord where the Users gets superior experience at affordable prices and Landlord gets a better lease than traditional tenants.

Observations and Suggestions

Hot-desking - Flexible membership plans win-win for both Users and Serviced office operators. As many co-workers are on flexible membership plan, they do not utilize their space every single day, co-working space operators are able to sell more memberships than what the actual maximum physical capacity allows in the context of a traditional tenancy. This leads to higher revenue per floor area as compared to private/ dedicated office rooms. Besides providing hot-desking spaces, the serviced office operator also hedge by incorporating private rooms as they help to generate good cash flow for the business until the co-working community grows significantly.

Revenue Sharing Model for Landlords. New business model coming up in Delhi NCR is that Landlords could convert undesirable or non-performing or underutilized space to a co-working space and share revenues with the space operator.

Landlords find Co-working leases lucrative over traditional tenant lease in the long run. At first glance, co-working space leases are not attractive to landlords who prefer larger tenants with long leases over the co-working concept. Long-term leases not only help to ensure that landlords get a steady stream of the rental income that is essential for their asset value, they are also less costly to manage compared to short-term tenants. However, more and more landlords are now breaking traditions and signing-up for co-working space tenants due to the following reasons:

Property lying vacant for more than one year leads to losses

High cost of traditional tenant acquisition, around 15% of Rent

Blue ocean strategy for landlords to gain a competitive advantage over peers as it could even help to attract and retain quality tenants

Observations and Suggestions