Collaborative Spaces in a Dynamic World Order
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India – November 2020 SPOTLIGHT Collaborative Spaces Savills Research in a Dynamic World Order Collaborative Spaces in a Dynamic World Order Contents 03 Preface 04 Dynamism in the Current Decade 06 Coworking Landscape: India & The World • India: Second Largest Preface • Large Coworking formats in India compared to the world average Disconcertingly similar to some economic devastations of the past, • Tech cities in India to lead the Coworking activity • Holding Advantages: Coworking vs Traditional Leasing Mindset such as those caused by the dotcom burst at the turn of the century or the Global Financial Crisis of 2008, the current pandemic has tested social and economic resilience in the extreme. If the degree of severity were to be measured qualitatively, the “VUCA” (Volatility, Uncertainty, Coworking: Future Scenarios and Projection-Model 11 Complexity and Ambiguity) is significantly pronounced this time. • Evolving Operator Strategies Figuratively, it has thrown a blanket of impact has been severe on those real estate developers and occupiers from different parts uncertainty and despair across the world, segments, which were at the forefront of of the country. as economy and business prospects fell progress. One among such frontrunners was Across the world the current pandemic is Coworking Universe: Preferences and Viewpoints drastically in 2020. The projections for the Coworking. 15 likely to usher a new age. The times ahead • Occupier Perspective first half of 2021 remain uncertain too, if not entirely damaged. In this report, our endeavour is to give you are being shaped by Artificial Intelligence, • Developer Perspective a three-phased picture regarding the future Machine Learning, Data Analytics, Cloud Nevertheless, the positive news is perhaps of Coworking. In the first part, we lay the Computing and such technological evolutions. buried deep inside the same kernel of foundations through an insightful narrative Real estate, like every industry, will adopt uncertainty. A strong recovery from the of the evolution of Coworking, with global these advancements. The impact is already Prognosis and Uncertainties slump appears to be inevitable. By various comparisons. The second part, then, deals in evidence, whether in space-design, 18 projections, such as those by IMF’s World with economic impact points of the current development process-flows, building control 1 Economic Outlook , India should be able to event and leads to an econometric model of systems, services, or even in real estate grow more rapidly in 2021 than most world the future. While we have given a summary transactions and payments. economies. In our estimation, the hope is picture of possible future paths, we remain Coworking too, like other sections of mainly based on two factors: global progress aware of the dynamic scenario in today’s Acronyms on the medical front to counter the virus, and commercial real estate, is on the cusp of world. The scenarios will need to be updated 20 the ongoing policy & fiscal stimulus in recent these changes, as it looks to regain the lost frequently and revisited at intervals. We times. momentum in the post-COVID dynamic world remain committed to this goal. In the third order. For real estate, the VUCA led deceleration part, we cover the viewpoints of various 20 References & Suggested Readings has been different for different segments. The stakeholders – as evinced through a survey of 1 Refer International Monetary Fund’s World Economic Outlook, October 2020 savills.in 2 3 Collaborative Spaces in a Dynamic World Order Collaborative Spaces in a Dynamic World Order Dynamism in the Current Decade The office, as a physical space, has undergone a series of transformations over the last few years, with new age corporations using technology extensively to define workplaces. Over the last decade, cabins, private it has been one of the leading demand from anywhere or near clients. Among offices and cubicles with space-ratios drivers of office space leasing in India, other things, the latter occupier strategy of 120-150 square feet per person with its annual share rising from around is the one that is heavily dependent on the progressively transformed into agile 5% in 2016-17 to almost 15% in 2019. availability of Coworking spaces across the city. workspaces, as the need for collaboration Interestingly, it is at this juncture of gained importance. Employee density Coworking’s super-growth that the The physical location of Coworking, in office spaces increased and the open outbreak of COVID-19 changed the rules therefore, is poised to gain a greater office layouts encouraged collaborative once again, as social distancing and significance in the Coworking ecosystem spaces. The space requirement thumb de-densification of workspace became in times ahead. rule of 100-plus sq.ft. per person reduced imperative. The pandemic has also led It is increasingly evident that the cyclical by 20-30%, on an average. organisations to reassess overall seat behaviour of office space ratios has been requirements, since WFH (Work-from- As a logical follow-through, shared taking organic as well as inorganic turns, home) has entered corporate-policies2. office space emerged as a separate creating fresh norms for areas, as well as asset class, establishing workspace as a As a result, several occupiers are altering locations of workspaces. The scenario, service instead of a physical resource, their real estate strategies, with some apparently, is only unfolding in a new bringing significant cost-advantages. consolidating operations, as others are cycle. It warrants close observations and The occupancies in Coworking, initially exploring ‘hub and spokes’ model where analyses, in the short-term, to decode dominated by start-ups, saw increasing a city head-office operates alongside its path during the third decade of this preference by mid-sized organisations as smaller offices spread across the city, century. well as large corporations. Consequently, offering flexibility to employees to work Alterations in workspaces Rise of BPOs De- Densification Back Offices Hub & Spoke Model +20 sq.ft. Large Space Hybridization Standards of space 100 sq.ft. -20 Shared Spaces sq.ft. Densifications of Space Open Plan & Hotdesking PRE FIRST SECOND THIRD 2000 DECADE DECADE DECADE Source Savills India Research 2 Gallagher’s COVID-19 Pulse Survey gave vital indications in this regard. The details of the same are seen https://www.ajg.com/us/news-and-insights/2020/aug/covid-19-pulse-survey-results-work-new-normal/ savills.in 44 5 Collaborative Spaces in a Dynamic World Order Collaborative Spaces in a Dynamic World Order Tech cities in India to lead the by Bangalore and Hyderabad - the cities the total leasing activity in the Coworking Coworking activity where commercial office real estate demand segment. The overall stock, expectedly, has Coworking Landscape: is generated mainly by technology occupiers. been highly concentrated in these two cities, Predictably enough, the heightened activity in In 2020, as of Q3, these two cities had a and the share is expected to be 51% by the end India & The World the Coworking segment has been dominated combined share of approximately 66% of of 2020. India: Second Largest Share of Coworking centres by region The century’s second decade witnessed a spurt of Tech cities in India lead the Coworking spaces in the commercial office hotspots of Asia, Oceania, Africa, South and Central America. Not surprisingly, by the time the decade ended, Asia had Coworking Activity challenged the hegemony of Europe and North America and accounted for 30% of the approximately 20,000 30% 5% Coworking centres worldwide. Interestingly the top ten countries have a share of more than 50%3. Asia Africa NCR Large Coworking formats in India 30% 4% 0.3 1.3 1.5 0.2 compared to the world average Europe Oceania 1.9 3.2 4.7 4.9 World over, the average Coworking centre has a capacity Mumbai of around 80 people, and the average space leased by a 0.7 0.6 0.6 0.4 centre, stands at approximately 7,000 sq. ft.4 24% 1% 2.5 3.1 3.7 4.0 In India, however, the Coworking players and operators exhibit greater confidence in the segment. The average North America Central America deal size of space leased by the such players has steadily risen over the past few years and was estimated at 6% around 50,000 sq. ft. in Q2-2020. This clearly indicates the preferences of a dynamic workforce and younger South America demography, which necessitates flexibilities. Flexibilities of design and interiors, collaboration and a sense of community as well. Hyderabad 0.0 0.7 2.1 1.1 Pune 1.9 2.6 4.7 5.8 Source https://www.Coworkingresources.org/ 0.3 0.1 1.0 0.4 Coworking centres-The top 10 countries 1.3 1.4 2.4 2.9 (No. of Centres) 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Larger deals 0 US Bangalore and hybridization India 0.7 1.6 2.3 1.1 of shared spaces has 3.9 5.6 7.8 9.0 UK Chennai been the hallmark of 0.1 0.4 0.6 0.2 markets like India. Spain 0.9 1.3 1.9 2.2 Germany Canada Australia Legend Mexico 2017 2018 2019 2020E Coworking- City wise leasing (in mn sq.ft.) trend Japan 2017 2018 2019 2020E Coworking- City wise stock (in mn sq.ft.) trend Brazil 3 https://www.coworkingresources.org/ 4 https://www.coworkingresources.org/ Source https://www.Coworkingresources.org Source Savills India Research savills.in 6 7 Collaborative Spaces in a Dynamic World Order Collaborative Spaces in a Dynamic World Order keep this asset class afloat are remarkable. The Holding Advantages: Per seat rental range* (in INR per Democratised Coworking vs Traditional two distinct advantages of Coworking in the month) across cities current times, which are likely to continue beyond And Even Demand- Leasing Mindset the COVID-phase, are Base BANGALORE Coworking in India has steadily challenged 1.