Cost benefits major draw for co-working spaces

Lower rentals, savings on operational costs and a more flexible work environment are prompting an increasing number of companies to prefer co-working spaces to conventional office spaces.

A company can save as much as 30% on the operational cost alone, according to some estimates. Besides, the lock-in period for co-working spaces varies between one and three years while companies lease conventional office spaces for five years followed by another five years or for three years followed by two extensions for a similar period.

“The biggest benefit of such office space is flexibility and access to a larger community that large corporates get. It also solves the problem of commuting for employees,” said Juggy Marwaha of We-Work, a US-headquartered provider of shared workspaces.

In such properties, companies get to save on other operational costs such as IT infrastructure, fitments, housekeeping and broadband connectivity. For space and cost efficiency, companies are consolidating and moving into co-working hubs.

According to real estate services firm CBRE, the average utilisation of assigned seats is 60% globally, excluding vacant seats, while the global average meeting room utilisation is just 30%.

“There is a tremendous saving in terms of cost for corporates. We have many Fortune 500 companies working out of our facilities. Coworking also helps companies scale up faster,” said Harsh Lambah, country manager at Regus, the world’s largest provider of flexible workspace solutions, which has 100 offices across India and plans to expand further in the country.

Large companies in information technology, banking, financial services and insurance sectors are increasingly opting for co-working spaces given the shortage of readyto-move in grade A offices across prime property markets, besides large corporations downsizing real estate budgets. Ram Chandnani, managing director-advisory and transaction services at CBRE South Asia said, “For occupiers, co-working spaces are a cost-effective option when looking to reduce overall operational costs, including overheads. For investors, it reduces the overall financial risk as the space garners rent from multiple businesses.”

He said that with occupiers continuing to focus on space utilisation ratios, reducing operational costs, and innovation in workplace strategies, CBRE expects this concept to see more traction in the near future. Some of the large firms that have opted for co-working space include American multinational personal care corporation Kimberly Clark, financial services firm BNP ParibasBSE -0.51 %, French telecom firm Orange, global lodging company Marriott International, mobile manufacturer Motorola, Dr Reddy’s Laboratories and IT firm Yahoo. Large e-commerce firms such as Alibaba, Amazon and Paytm are also taking up co-working spaces to expand their presence.

“Around 25% of client base is large corporates primarily setting up branch and satellite office,” said Sumit Lakhani, marketing head at Awfis Space, which has 7,500 seats operational flexible space at present.

The growing opportunities have also led to mushrooming of co-working space providers. “Large corporates have started to understand the need of co-working space as it helps them optimise solutions. Currently 55% of the desks at corporate offices are vacant. They are relooking their workplace strategy,” said Vikas Lakhani, co-founder of InstaOffice.

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