Coronavirus-fueled uncertainty could accelerate consolidation of flexible office spaces
The flexible office space is expected to undergo a major consolidation phase with uncertainty looming large on the segment due to the Covid-19 pandemic and a resultant demand slump.
While a large operator like RMZ is exiting the business, global major WeWork plans to expand as per client specifications only for some time. Awfis and Smartworks have also slowed down the pace of expansion as they continue to study the evolving market dynamics.
“We will grow as per our client requirement and focus on opportunistic expansion rather than speculative,” said Karan Virwani, CEO at WeWork. Though consolidation within co-working space started in 2018 with major acquisitions like One Co.Work acquiring IShareSpace and AltF CoWorking acquiring Noida-based Daftar India, Covid-19 will accelerate the process as weak players will be weeded out, say experts.
The period of low occupancy with increased operational costs is making multiple small players unviable. “There will be huge consolidation in the co-working space as managing cash flows will become difficult. We are onboarding clients and offering rental waiver till they occupy the facility,” said Neetish Sarda, cofounder of Smartworks.
The pandemic has hurt small co-working space operators with around 3.2 million sq ft of flexible office space expected to be vacated this year, according to a study by Knight Frank India. “We expect larger players with a greater weightage of enterprise tenants to endure, while those with tenant profiles predominated by MSMEs and startups are expected to shut businesses,” said Shishir Baijal, chairman, Knight Frank India.