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Co-working 3.0: Hybrid office model becomes the new normal
Co-working 3.0: Hybrid office model becomes the new normal

October 20, 2021

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The future workplace will not be binary. It will be a mixture of several workplace formats, with coworking riding growth in the new normal. In the pre-pandemic era, if a certain A company was looking for coworking space, the options were cookie-cutter workstations, with 50-60 sq. ft.  of average space per desk. Now, imagine the same company A is exploring a hybrid space across locations. It can utilise the services of a coworking operator to find the perfect space in preferred locations and customise the workplace as per its needs. It is no longer about where employees are working, but about how they are working.

Coworking space grew strongly during 2017-2019 with its stock growing by 2.3 times in 2019 as compared to 2017. The share of coworking space in total leasing volume also rose from 6% in 2017 to 20% in 2019. However, during 2020, this pace of growth experienced a setback. Across the top operators’ portfolios, the median occupancy level was around 65% during 2020. Occupiers closed unprofitable centers and postponed and even cancelled some new leases. Now, we are entering coworking 3.0. Mandates with occupiers will be the way to go, and speculative buildings are a thing of the past.

Operators will also look at newer business models ranging from management agreements, hybrid models (fixed plus revenue share) to franchise models.

Choice-based models to emerge

Many Fortune 500 companies are betting on expanding through coworking spaces. During H1 2021, IT-BPM drove the bulk of transactions with a 57% share in total leasing in coworking centers.

Why should larger enterprises look at coworking?

  1. Greater flexibility in leasing
  2. Outsourcing of space delivery and management to a third-party
  3. Capital-light deal structures

As a hybrid model of working takes shape, occupiers are looking at decentralised teams, work from (near) home, and the hub and spoke model. Coworking spaces will fill this gap and offer convenience to employees, while offering a collaborative workspace. It will provide a tech-enabled, customised experiential workplaces to enhance productivity and wellness.

Over the next few years, most landlords will have a coworking share in their portfolio. However, they will look to partner with operators with experience in  operations and management.  

Occupier experience is key

Occupier experience has become of utmost importance in this competitive environment. User experience will determine brand loyalty in this highly competitive segment. The inclusion of digital infrastructure and smart facilities will increase operational efficiency and overall asset value. Moreover, providing facilities related to health and wellness will retain occupier interest.

Operators are also coming up with innovative solutions such as single-day work passes, global location access and virtual offices. Some of the coworking space operators are also partnering with educational institutionsand service companies to organiz skill development and knowledge sharing programs for their occupiers.

Coworking mushrooming in Tier 2 – 3 cities

Initially, the growth of coworking spaces was limited to the top 6 cities. However, post-pandemic, operators are expanding into tier-II cities. Now we are seeing large enterprises setting up satellite and sales offices in smaller cities. Moreover, hyperlocal delivery players are taking up small office spaces in multiple locations as they are expanding in smaller cities. We expect this trend to continue and demand from e-commerce and fintech to rise in the next two years. Many of these existing centres are currently operating at more than 70% occupancy levels.

Overall, the utilization of coworking is imminent for growth and brand differentiation. The latter half of 2021 is already seeing a change in the way coworking companies operate. As our workplaces undergo a change, coworking too will evolve and offer more value to users.

 

About the author

Ramesh Nair, Colliers India

- By Ramesh Nair, CEO, India and Managing Director, Market Development, Asia|Colliers 

With a diverse experience of over 23 years, Ramesh’s career has been focused on overseeing/driving transformational change and delivering real estate solutions to domestic and multinational owners, investors and occupiers across India and South Asia. As the Chief Executive Officer (CEO), India & Managing Director, Market Development, Asia, Ramesh is responsible for the overall direction, strategy, and growth of the India’s business. His key responsibilities include driving long-term sustainable and profitable growth for the company along with developing company’s short-term and long-term strategy. He also drives business development and key relationship management across APAC to expand our client base and identify new business and opportunities to accelerate success.

For further information, please visit:

https://www.colliers.com/en-in 

https://www.linkedin.com/company/colliers/


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Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 66 countries, our 18,000 enterprising professionals work collaboratively to provide expert real estate and investment advice to clients. For more than 28 years, our experienced leadership with significant inside ownership has delivered compound annual investment returns of approximately 20% for shareholders. With annual revenues of $4.5 billion and $98 billion of assets under management, Colliers maximizes the potential of property and real assets to accelerate the success of our clients, our investors, and our people. Learn more at corporate.colliers.com, Twitter @Colliers or LinkedIn.

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