Close to US$ 400 mn will be invested in co-working space in...

Close to US$ 400 mn will be invested in co-working space in 2018: JLL India

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Over 13 mn people will operate out of co-working spaces by 2020

  • Tier 2 market potential estimated to grow to 8.5 mn seats by 2020
  • JLL latest research ‘Spotting the Opportunities: flexible space in Asia Pacific’

JLL, India’s largest professional real estate services company, estimates that over 13 million people will work out of co-working spaces by 2020. In a recently released research report ‘Spotting the opportunities: flexible space in Asia Pacific’, the company says that demand for flexible offices – including coworking spaces and serviced offices – is growing faster in Asia Pacific than anywhere else in the world. In India, the growth of flexible office space is expected to grow at 40 – 50% in 2018. Theregion’s stock of flexible floor space is growing at 35.7 per cent per year compared to 25.7 percent in the US and 21.6 per cent in Europe.

The potential market size of co-working across India is expected to be 13.5 million users by 2020 about half of which will be from enterprises, which are expected to take up 10.3 mn seats. Freelancers and Small & Medium Enterprises (SMEs) are expected to contribute 1.5 million users worth of demand, while it is anticipated that startups will demand upto 100,000 seats by 2020. The report further indicates, that the top 6 cities[1] will require an estimated 5 million seats in co- working spaces, while, 8.5 million of the projected demand will be in Tier 2 and 3 cities.

The report, which looks at major coworking and serviced office operators in 12 Asia Pacific markets, including India, reveals that the number of major flexible space operators has doubled, while flexible floor space has increased by 150 percent between 2014 and 2017.

“In India, the coworking segment is expected to grow by 40-50% in 2018 alone. By the end of the year, we anticipate flexible workplaces would attract investment upto US$ 400 mn. With over 200 premium business centers across the country, set to double by 2020, co-working spaces will reflect the global trend of being closer to 20% of total workspace”, mentioned Sandeep Sethi – MD, Integrated Facilities Management West Asia, JLL. He highlighted that rise of the millennials and a large, vibrant start-up ecosystem are the key factors contributing to this trend in India. However, while the growth of this segment in India has been phenomenal, most corporates are in pilot or experimentation phases – revealed a high- powered panel discussion comprising of real estate thought leaders and influencers at a recently held thought leadership event ‘JLL Perspectives’. Furthermore, corporates hin India want to better understand and mitigate, the potential challenges before adopting the model .

Implications for real estate investors

In response to growing demand, JLL notes that landlords will continue to form joint ventures with coworking operators, or create their own flexible space offerings to meet tenants’ needs. Meanwhile developers are adapting to what could be a new standard in property development whereby flexible workspace will be an amenity as essential in a commercial building as food and beverage outlets or a gym.

“By 2030, flexible work spaces could comprise 30 per cent of corporate commercial property portfolios worldwide,” said Jeremy Sheldon, Managing Director, Markets & Integrated Portfolio Services, JLL Asia Pacific. “Although corporate adoption is still in its early days, there are certain factors that will continue to make this region a hot spot for coworking growth.”

One of the key drivers of the surge in corporate demand for flexible spaces, identifies the report, is plug-and-play simplicity, particularly for larger companies. The ability to move in and out of an office at short notice, avoid complicated contract negotiations and fit-out work is a convenient option for many occupiers.

At the same time, businesses are looking to encourage collaboration among employees and are using shared workspaces as a way to foster innovation through exposure to new ideas and ways of working.

The report refers to flexible office space as the net lettable area occupied by major coworking and serviced office operators in 12 key cities across the region, excluding incubators, accelerators and corporates’ internal coworking spaces.