Demand for co-working spaces to go down significantly, Hundreds of operators will shut shop in next few months

New Delhi: The corona pandemic is having a deep impact on the various segments of the real estate industry and may clip the wings moderately of the newest segment co-working. The “demand from MSMEs and start-up tenants to reduce to a great extent” predicts Knight Frank India in its latest report on the flexible offices in India. The small coenterprises and startup tents constitute about 25-40 percent of the clients of big and small co-working operators. Some of the operators have around 60 percent of its clients list being constituted by these entities.

The small co-working players will be most impacted due to the lower demand from MSMEs and start-up clients and will have to shut shop. “Small operators will not be able to sustain, due to their disproportionate exposure to start-ups and SME tenants,” said the report.

About a quarter of the total current co-working spaces in India, that is, about 6.4 million square feet of overall 25.45 million square feet in top 8 cities is in the hands of small operators. At least 3.2 million square feet of this 6.4 million square feet co-working spaces will vanish as the small players will fade away in 2020.

The corona pandemic will bring about huge changes in the way the industry works. Even the larger co-working players will have to re-negotiate the rentals and even the renewal terms with their enterprise clients. The co-working players will also have to go for revenue or profit - sharing agreements with their landlords to cut down their own fixed costs have more financial resilience.

The good news is that the demand from large enterprise for flexible office spaces will not only sustain but also grow in the medium to long term. The flexible office operators who have 60-75 percent of their clients as large companies will not face significant financial challenges but will still, have to renegotiate rentals and other terms.