There has been shifts in corporate culture; use of office space have been altered: Rajat Johar-Skootr
The COVID -19 outbreak has altered the dynamics of the overall industry of managing CapEx and in order to minimize risk, it is anticipated that the smaller or city-specific players will either look to get acquired in the future. But with mass vaccination roll out, sectors such as office, retail, industrial & logistics have shown signs of green shoots, says Rajat Johar, Country Head, Skootr. In an exclusive interview to RealtynInfra.com, Johar talks about various aspects of managed office spaces, the challenges ahead and also the expansion plans lined up.
How do you see rest of 2021 unfolding for the Managed office space industry in the country?
After the unlocking of the economy in July 2020, the market traction started to improve as total transactions and office completion have recovered by 80 percent and 126 percent respectively in 3rd Quarter of 2020. Despite the short-term challenges, the real estate sector witnessed a paradigm shift, Managed office segment witnessed strong interest from sectors such as technology, consumer durables, BPOs, banking and financial services leading to a forward-looking annual growth in office absorption. Additionally, the sentiment towards office space remained positive giving way to newer avenues in India.
India is geared for a sharp rebound recovery in 2021 with a double-digit growth expected in GDP, we can expect a sustained demand in commercial real estate sector. Moreover, with mass vaccination roll out, sectors such as office and commercial real estate such as retail, Industrial & logistics have shown signs of green shoots. We are expecting that in 2021, the industry will see a rise in demand and a healthy growth of existing and upcoming infrastructure.
Do you see consolidation a possibility in the industry in 2021? How good or bad will consolidation be for the co-working/ managed office space industry in India?
The office space format has come a long way since it was regarded exclusively as a place of work at a convenient location, with plain desks, chairs and cabins comprising the set up. Over the last couple of years workspaces have significantly evolved in terms of space utilization, equipment placement and automation.
For companies and freelance professionals using coworking space, the choice of provider typically comes down to what best suits in terms of price, design features, services offered and location – and more operators in the market undoubtedly encourages competition. Consolidation, on the other hand, could narrow the options available, however, occupiers might have different expectations of the user experience – while some might go with big brand approach, other prefer to have the local touch and consolidation tends to change the look, feel and operations of existing spaces. The COVID -19 outbreak has changed the dynamics of the overall industry of managing CapEx and in order to minimize risk, it is anticipated that the smaller or city-specific players will either look to get acquired in the future,or will be targets of operators looking to enter or strengthen presence in one market.
What has been the learnings for the co-working industry from the pandemic and how is the industry poised for growth (or Stabilisation) going forward?
The pandemic brought a major challenge of ensuring survival; of changing the real estate industry with enhanced use of technology and digitalization. With office sector having to close physical facilities due to lockdown and prepare for reopening keeping health and safety of the employees and occupiers as paramount. The office market started capitalizing on these opportunities by undergoing a transformation in order to redefine workspaces to meet the needs of the new normal.
People have started to return to office, mostly in hybrid model, however, their requirements are different from what they were pre- pandemic. Now that there is vaccine accessibility in the country, we can observe the bottleneck constraints easing in the sector. We are nearing the pre-pandemic demand for office space and are optimistic that the pace will continue to rise each month.
What are the current trends emerging in the industry?
Office space has already witnessed strong interest from sectors such as technology, consumer durables, BPOs, banking and financial services leading to a forward-looking annual growth in office absorption. While the office real estate market in India is evolving and the dynamics of the industry are changing rapidly, there is also a strong need for corporate occupiers, developers to plan ahead for the post-Covid-19 world.
Managed workspace is set to be latest trend within the larger office & co-working ambit. Fortified with 360-degree outsourced solution to office need and an opportunity for brands to establish a unique identity while working with other organizations. This business model works on tailor-made office solution for modern professionals. Corporate organizations around the world are progressively seeking avenues for cost optimization and better control over peripheral expenditure. By focusing on ergonomic space management to maximize efficiency and add value, serviced office operators are offering bespoke and out of the box office solutions.
Q4 Has there been a correction in real estate prices for the co-working/managed office space players? I mean, are there developers and property owners who are offering their properties at lower prices/rentals to the co-working players? If yes, what is the percentage reduction as compared to the beginning of 2020?
At the onset of the COVID 19 outbreak the real estate market witnessed a slight dip in the demand with almost three-month long lockdown creating uncertainty in businesses. Driven by a combination of factors and accelerated use of technology due to COVID-19 outbreak, shifts in corporate culture and use of space have been altered. Managed office and Co-working players restructured their existing and new deals to suit to the client’s demands.
What opportunities exist in tier 2 and 3 cities for the co-workingplayers?
The concept of coworking office has seen tremendous growth from the past several years and it is essentially due to the private sector’s response to meet today’s corporate clan requirements. In India coworking is still in its early stages of development as a profound form of office space in tier 2 cities. However, the notion of coworking spaces has gained immense popularity among boutique firms and startups, for whom coworking spaces offer flexibility without the need to tie up lease obligation.
While freelancers, startups, small-medium sized enterprises in India are primarily focused on the cost factor and infrastructure. The important trend that impacted the corporate world post pandemic were Capex and a thriving startup ecosystem. Coworking spaces offer high-quality offices that are 24*7 accessible at a reasonable cost. It is estimated that coworking spaces can save up to 25- 30 percent compared to conventional offices. This aspect makes tier 2 and tier 3 cities an attractive option. A growing number of coworking spaces in tier 2 cities like Indore, Ahmedabad, Rajkot, Udaipur, Kota, Surat, Kochi and other cities have boosted the startup environment and are able to create communities within coworking spaces. Additionally, budding entrepreneurs would not prefer to lease a traditional office setup as this can consume a lot of CapEx and time but coworking spaces will make it easier, shortens the gap and will allows professionals to start their work right away. All these factors make tier 2 and tier 3 cities more suitable for expansion.
What are your expansion plans in the next 1-2 years?
Skootr is India’s foremost ‘Premium Managed Office Space’ provider, where we co-create world-class workspaces & experience for enterprises. With Grade A assets & best-in-class services, Skootr has become India’s ‘go-to’ brand for bespoke offices amongst top international clients. Skootr has leased over 3.25- lakh Sq Ft Office Space in Hyderabad aiming to cater to large multinational clients.
We are aiming to expand by 4 million square feet by 2024. Our aim is to add-on to our verticals through business diversification and by opening new Skootr centers in major cities across India and elsewhere.
We plan to accomplish this by simultaneously working on the parameters of creating economic value in the market through its existing range of offerings, setting new trends in workspace design, management and culture with due diligence to COVID compliances and leading industry standards.