Top 5 trends after 2nd wave in coworking industry
--By Mr Aditya Verma, Founder & CEO, The Office Pass (TOP)
India went through the worst health disaster of the century with daily COVID cases rising to unmanageable proportions. The second COVID wave was worst compared to the first in several ways. The number of daily cases peaked to over 4 lac compared to 1 lac in the first wave. The strain on health infrastructure in cities got exposed. The death of near & dear ones caused sorrow and fear among people at large.
When a disaster of such magnitude plays out, it leaves behind some temporary and few permanent changes in beliefs and behavior. The real estate industry is no exception. I expect some emerging trends in the real estate sector in general and the coworking industry in particular. Some of them are mentioned here
1 Movement from centralized to distributed workspaces
It is widely expected that mid to large size companies will move away from large centralized office operations to distributed workspaces. The mutated Delta variant of virus which caused the second wave has proven to be highly contagious. After infecting one member of a family - it spreads fast and infects other people in close proximity. Such an outbreak in an office can severely impact business continuity. Shutting of a centralized office can lead to loss of revenue and momentum. Companies are actively considering moving from large offices to de-centralized or distributed offices to prevent such incidence.
Since it impractical for each company to open 4-5 smaller offices in different parts of each city; they rely on Coworking operators like The Office Pass (TOP) to provide this service. By using TOP offices, companies are able to save valuable time and effort and provide comfort to their employees post the second wave of pandemic.
2 Cat A companies & MNCs behaving like mid-size companies
The two Covid waves have had a negative impact on organizations of all sizes and scales. Cat A companies and MNCs have seen their revenue and productivity stagnate for over a year. These companies are under pressure to moderate cost to stay competitive. They are looking at all expenses including office operating cost - which is the third biggest cost after manpower & marketing. Cat A companies are moving away from traditional long-term leases to more flexible workspaces. By doing so they are not tied-up in lock-ins of 3-5 years. Moreover, they get the flexibility to increase or reduce capacity in line with the emerging business dynamics. This cost-conscious behavior is similar to that of a mid-size company that is continuously looking at cost optimization.
3 Managed office is the new flavor of the market
A Managed office is a tailored workspace offered and managed by a third-party operator like The Office Pass (TOP). Unlike a coworking space where multiple companies work under the same roof, managed offices are dedicated spaces for a business that reflect their brand identity.A Managed office offers privacy and complete autonomy to its occupant. Post the Covid second wave, companies wanting to move away from traditional leases - are finding the managed office product a perfect solution for their problem. It saves them time and cost associated with sourcing, fitting and running office operations - as which are managed by professionals. They can utilize this time and money to focus on their core business. As per current scenario, a Managed offices is likely to emerge as the most powerful trend in the post-pandemic period.
4 Work Near Home or Neighborhood Coworking to gain prominence
Companies have realized that they are unable to achieve desired employee productivity and social connect in the WFH scenario. This is on account of multiple factors including Indian joint family system; small size of Indian houses; lack of suitable work area; stigma associated with WFH; poor connectivity and blurring timelines between work& personal life.
As competitive intensity picks among Indian companies, the ones with 100% WFH stands to lag behind- especially if the work requires collaboration, convincing and customer outreach. To prevent this productivity loss, companies are allowing employees to work from a Co-working office close to their place of residence. This practice, being followed by The Office Pass (TOP), is popularly known as Neighborhood Co-working. Employees are able to reach office without the use of public transport which prevents the spread of virus making it a win-win. The concept of Neighborhood Coworking is likely to get amplified over the coming years as most people realize the advantages of working from near home.
5 Correction in commercial property prices to benefit occupiers
The trend of companies moving away from traditional leases and from centralized to distributed offices is likely to intensify in the post Covid period. The spaces being vacated are large floor plates (15,000 to 50,000 SqFt) whereas the current demand is for small distributed offices (5,000 to 8,000 SqFt). This IS creating an imbalance in the RE market. Coworking operators are likely to take these large spaces and offer smaller chunks of it to multiple mid size companies. High vacancy in the commercial real estate segment has already caused correction of 20% in some macro markets. These prices are unlikely to move up in near term.The occupiers of Coworking spaces & commercial real estate will enjoy the benefit of low cost in post Covid period.
Although COVID has caused massive disruption in the commercial real estate segment, it is likely to be long term positive for the Coworking industry. The coworking industry is likely to grown by 20% plus in the post pandemic scenario. Managed offices, distributed offices& affordable pricing are likely to be strong trends in the post-pandemic period.