In human history, there have only been a few times that made it impossible for humans to predict what the world could look like in the coming month, let alone predicting the coming year. Imagining life to be how it was at the start of 2020 now appears to be a distant dream. There may be somethings that might not change and yet some other things that may change forever.
The outbreak of Covid-19 leading to the government-mandated social distancing norms coupled with the nationwide lockdowns are beginning to demonstrate their impact on workspace requirements, space management techniques as well as design guidelines for various flexible workspace operators. However, while a few short-term repercussions are inevitable, the long-term fundamentals of the sector remain sound and strong.
THE IMPACT SO FAR
At the onset of the COVID 19 outbreak the market witnessed a slight dip in the demand for new memberships at various coworking spaces along with a minor drop in the existing occupancy of various centres This was primarily due to various start-ups and MSMEs choosing to adopt the work from home model during the period of the lock down. The growth in demand for Managed office spaces also tapered momentarily owing to large enterprises wanting to take a step back and rethink their growth and real estate strategies.
This reduction in activity also gave an opportunity to the Flexible space operators to rethink their offerings, products and strategies, to reengineer their models and to make their solutions more lucrative for their customers and more sustainable for their own businesses in the long run. This has led to a lot of operators inventing new and innovative long- & short-term solutions to support and benefit their customers. A few of such offerings include Pay per use passes, Flexi Passes, Reverse Officing Solutions, Turnkey Solutions, Multi-local Access, Shift Working, Zero Lock-ins, Work Near home, Work at Home Solutions, etc.
While the operators continue to innovate, the customer response to such solutions has been encouraging thus far. Operators are also taking aggressive steps and measure to ensure safety and security of all their customers and are ensuring that they adhere to all government advisories and guidelines. Most of the coworking spaces across the country are now operational and providing attractive prices and solutions to new and existing customers.
Larger operators on a relatively stable financial footing may find opportunities to increase their market share at the expense of less-established platforms. We could witness instances of more profitable players acquiring fitted out facilities from struggling operators. Some large operators may also enter strategic portfolio level tie-ups with prominent developers/landlords to enhance their footprint in sought after locations. Many building owners are also keen on adding flex as an amenity to their buildings and are evaluating partnership structures with various operators.
We may also witness some merger and acquisition activity among operators in the current situation. Surrendered or subleased space by struggling tenants could be acquired by financially sound flex operators or tenants seeking fully fitted-out spaces. Operators will try to manage operational costs, pursue sustainable growth, and exert tight control over CAPEX to ensure profitability.
Although the COVID-19 pandemic could put short brakes on the aggressive operator expansion for a while, the future of this sector will be bright as the flexible space market remains resilient. The long-term drivers of flexible space demand are intact, with smaller users continuing to seek cost-effective fully furnished and managed spaces and large multinationals looking to build more agility into their office portfolio.
The inventory of flexible office space in the Asia Pacific rose threefold over the past five years, supported by the shared economy boom and the rise of venture capital. Furthermore, the total inventory of flexible space in the 18 major cities of APAC tracked by CBRE reached 71 million sq. Ft. by the end of March 2020. India’s total Flex stock currently stands at over 33 Mn SF. This is a true testament to the sector’s strength, value proposition and resilience. To cater to this resilient market, CBRE has launched cbre.co.in/properties- Commercial Listings Platform. The digital platform is a one-stop solution that will display available commercial spaces, including Office, Flexible workspace, and Retail across India.