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Nearly 3.2 million sq ft of co-working space may seize to exist in 2020: Study

A shakeout is due in the co-working market after Covid-19 crisis has hit the smaller operators hard with around 3.2 million square feet (MSF) of flexible space expected to be vacated by these operators in 2020, said a Knight Frank India study.

The double whammy of low occupancy and increasing operational cost will make multiple smaller players unviable, said the researchers. Approximately 25% — 6.4 million square feet (msf) of the total 25.45 msf — of the co-working space in the top eight cities is operated by smaller players with Bengaluru and NCR housing the most companies.

“The Indian co-working business, much like other sectors will feel the impact of the Covid-19 pandemic with the fringe players likely to make an exit. This will be a period of shake-out for this segment where we expect larger players with a greater weightage of enterprise tenants to endure while those with tenant profiles predominated by M/SMEs and Startup are expected to close businesses,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India.

The pandemic will accelerate demise or downsizing of financially weaker players who were catering to the SMEs and startups which have also been struggling during the lockdown.

"Those co-working companies that were focused on start-ups and SMEs have been impacted badly. This is because the number of seats and tenures of such clients were both low and in the crisis of this kind, the start-ups are focused on survival and have simply walked away from the co-working spaces. In contrast, players like us with an enterprise focus have had better outcomes," said Abhishek Goenka, CEO, CoWrks, a leading co-working company. Knight Frank believes that while the industry is expected to see significant exit of startup tenants and smaller occupiers as they cut on costs in this crisis scenario. However, the demand from large enterprises is expected to grow over the medium to long-term.

"Profit-sharing model has emerged as a winner in this economic downturn. With the uncertainty looming around Covid 19 and requests for rental rebates/deferred payments from clients, the profit sharing model helps create a win-win scenario for all 3 stakeholders - co-working operator, landlord & clients," said Sumit Lakhani, chief marketing officer at Awfis Space Solutions.

There are over 250 co-working players operational in India including WeWork, CoWrks, Awfis, BHIVE and SmartWorks. The segment is dominated by top 10 players having 75 - 80% of the market share in the top eight cities, the report said.

Source: https://realty.economictimes.indiatimes.com/news/commercial/nearly-3-2-million-sq-ft-of-co-working-space-may-seize-to-exist-in-2020-study/76446987

June 18, 2020

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