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Post-Covid office demand changes to push co-working leases 42% in 2021

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MUMBAI: As organizations reassess their overall office space requirements and look for workplace flexibility in the wake of the pandemic, activity in the co-working offices segment is likely to gather further momentum in the next year as operators will reposition themselves and continue to drive the commercial real estate market of the country.

Leasing by co-working operators is expected to increase 42% on-year in 2021 to 4.9 million sq ft with shared offices likely to gain greater significance in the post-Covid world, showed a Savills India study.

Co-working players are expected to close the year 2020 with leasing of around 3.4 million sq ft, accounting for 11% share of the total office leasing market. Although the overall leasing activity is expected to reduce significantly in 2020 as compared to 2019, it is expected to increase steadily over the next two years. The share of co-working space take-up in overall office leasing activity is poised to rebound to a 15% share in 2021, similar to the 2019 level.

According to Savills, over 3,000 co-working centers across the country are likely to offer approximately 1.0 million desks by 2022. Additionally, leasing activity by the co-working segment is expected to grow by 29% during 2015-2022.

“Over the years, shared office space has emerged as a separate asset class bringing significant cost-advantages to occupiers. While it was initially dominated by establishing workspace we have seen an increasing preference by mid-sized firms as well as large corporations,” said Arvind Nandan, Managing Director, Research and Consulting, Savills India.

The ongoing pandemic is expected to lead to an array of trends in the co-working segment including the rise of marketplace platforms with sectoral expertise in flex spaces and increased consolidation with large investor-backed operators weathering the storm successfully. Co-working operators are also likely to tap into the residential and retail market offering an integration of retail centers and office spaces.

“At a juncture when co-working spaces were seeing strong growth, the outbreak of Covid-19 has changed the rules with social distancing and de-densification of workspace becoming imperative. However, we believe that flexible workspaces will reinvent and reposition themselves, emerging stronger on the other side of the pandemic,” said Naveen Nandwani, Managing Director – Commercial Advisory & Transactions, Savills India.

A survey conducted among occupiers and operators by Savills India, as part of the study, indicated few aspects that are likely to alter the co-working offerings in the near future. About 60% of occupiers believe that the Work-From-Anywhere (WFA) trend is likely to stay in the near to medium term. Hence, organisations are likely to switch to a hub and spoke model. As per the survey, 61% of occupiers seek shorter lock-in period and rent assessment cycles as businesses have become highly dynamic.

Around 30% of the developers surveyed strongly agreed that technology is going to shape the future of workspace. With 93% employees wanting a commute time of less than an hour, developers foresee a high demand concentration in the suburban and peripheral areas of cities. Apart from rental reassessments with occupiers, 79% of the developers recognize that they are expected to meticulously and rigorously analyse force majeure clauses among other aspects.

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