Shared working spaces: The disruption in the new office market
Looking for flexible and cost-effective working spaces? Welcome to the new-age concept of co-working spaces
In the last few years, India has emerged as one of the world’s most preferred markets to invest in thanks to its buoyant economy, steady progress in adopting regulatory reforms, and its ever-growing talent pool. According to the CBRE 2017 Asia Pacific Occupier Survey report, the future looks bright for India with several multinational and Asia Pacific-based companies expressing an interest in entering the Indian market and making their presence felt. Statistics reveal that the demand for office spaces increased from 1.4 million square feet in 2001 to 15.2 million square feet in 2015.
Several MNCs leased office space in metro cities like Bengaluru, Hyderabad, Delhi, and Mumbai given their superior infrastructure facilities. The increased demand for premium commercial real estate has increased the cost of leasing office space in the bustling metro cities. This is attracting many MNCs to co-working spaces, which are allowing big companies to think beyond leasing/buying a space and are enabling them to maximize their focus on expansion strategies with the help of cost-efficient solutions.
Initially, it was only freelancers, budding entrepreneurs, and startups with constrained budgets that relied on co-working spaces. However, with negligible capex requirements, affordable renting options, innovative and collaborative workspace designs, co-working spaces are attracting larger companies as well. Co-working spaces are the new disruptors in town, enabling enhanced collaboration between outside partners, offering high productivity, efficiency in utilization, providing a cost reduction in the range of 20-50%, as well as catering to the new-age needs of a growing younger workforce.
Why co-working spaces offer better economy to MNCs
Most co-working spaces offer the same traditional office requirements such as a desk, internet connectivity, printing machine, conference space and refreshments like tea or coffee. So, how are they different from the traditional set-ups and what are the reasons for the quick rise and acceptance of shared working spaces amongst MNCs?
In a country like India, especially in metro cities like Mumbai and Delhi, the average rent of an office space in a prime location ranges between Rs100and Rs 250 per sq ft. Add to this the cost of setting up and maintaining the space, additional manpower, deposits, registrations along with other miscellaneous expenses, and you have companies needing to spend a lot on their overall operational costs. Most co-working spaces charge users by the hour/per seat, meaning that companies can save on expenses such as electricity, water, administrative costs, and internet charges as these are included in the cost per seat. Due to the burden of these utilities being shared by multiple companies, MNCs have to invest less in overheads.
MNCs often benefit from having satellite offices set up within the city at different locations apart from a flagship office space. However, finding a suitable location for these secondary offices comes with a hefty price tag as well. In such a case, opting for a co-working space can be more beneficial. They provide a great geographical advantage, being either located very close to the business centers of the city or near airports or railway stations, facilitating quick transportation. Co-working spaces also offer a wide variety of options to large enterprises for relatively shorter-term requirements, like 12-18 months or even for tenures of less than one year. Several large firms are latching on to such spaces, as they find them economical as compared to leasing. Commercial leases for the kinds of office space needed by big companies are usually accompanied by a minimum lock-in period of five years. Several MNCs may require office space for a shorter lease period, and would prefer more flexible solutions.
While shared spaces may cost more per square foot in terms of rent or charge per seat, the minimal expenditure and other infrastructural and technological facilities are more than sufficient to offset that. With smaller teams working out of these spaces for a limited period of time, there are no chances of companies having to pay for desks lying vacant and underutilized. Several studies have proved that co-working spaces provide an excellent opportunity for employees to exchange innovative ideas, discuss new technologies, and adopt new practices. Unlike a traditional set up, where there are high chances of internal politics and direct competition, shared spaces consist of employees who work for different companies and projects. They offer the perfect opportunity to network, discuss new ideas, build business relationships, collaborate with free thinkers and make one’s own work identity stronger.
How co-working spaces are better for MNC processes
Co-working spaces have the ability to replace traditional working styles and expose employees to newer working patterns and alternate industries. Shared spaces assure superior internet connections, conference rooms, and offer other tech support, which is useful for consultants/freelancers and MNC employees to stay connected via video calls or attend webinars. Consultants/freelancers find such co-working spaces attractive due to this infrastructure. A lot of MNCs have freelancers working for them on several projects as consultants; instead of working out of their homes, these freelancers can now work with the MNC team and make the best use of co-working spaces, where they are easily able to exchange ideas with their superiors directly. In this manner, a co-working space enables employees and vendors to work in proximity with their superiors and cultivate mutually beneficial partnerships.
While a traditional office set up can be uninteresting, modern co-working spaces infuse youth and life into the boring constructs of a typical office space. Often, the monotonous work schedule combined with no recreational activities and poor infrastructure fails to churn out the desired results. MNC employees tend to have fewer rest and recreation facilities available to them at conventional offices. Co-working spaces allow the team to work in a range of spaces, apart from offering flexible working environments and recreational activities for the team. This improves employee satisfaction and productivity substantially. The ready infrastructure, inspiring work environment and advanced technological support are a few reasons that make shared office spaces attractive to many large companies.
Imagine an office space where you could brainstorm over a mug of beer or share your desk with a graphic designer or an artist; a place without hierarchy, cubicles and dress codes, where creativity scores and networking thrives. These spaces not only have the ability to boost employee motivation and retain employees for a longer period, but also encourage collaboration and knowledge sharing to a great extent.
The CBRE report hinted that co-working space leasing in India is expected to touch 10 mn sq ft by 2020. The soaring office rents, long lease terms and poor quality of office spaces are making MNCs shift their preferences to shared working spaces and this figure definitely seems attainable for the cool, new office spaces of the future.