Coworking - An Investment Worth Giving a Chance

By
Telukunta Sai Kinnera,
Coworking - An Investment Worth Giving a Chance

Coworking, since recent times, had started to become an alluring concept because back when it first started to appear, it countered the disparaging views of the traditional office. If we look back to just a few years ago, coworking was considered to be a “movement” or a trend, with many thinking it to be quite odd and unrealistic.

Fast forward to 2019 and coworking is a full-blown industry that has taken conventional real estate industry and the way people work by a turn. It has taken them to a whole new page. Something which was a trend a while ago has started to become the new normal today.

This article will help you explore all the aspects as to why it has become the new normal today and why it is an investment worth giving a chance.

What is Coworking?

Coworking is the arrangement in which several workers from different companies share an office space. This allows cost savings and convenience as they use common infrastructures such as equipment, utilities, refreshments, and a lot more.

Coworking Spaces in India

Coworking spaces are now one of the unparalleled and newest trends in India.

The places with the highest demand for such coworking spaces in India are metro cities like NCR-Delhi, Mumbai, Bangalore, and Hyderabad.

Need for Coworking Spaces
For Employees

  • Generally, most people can be productive in places where they find some quietness. It helps them focus more and concentrate on the work. But, with this being said, it doesn’t mean they are required to stay back in that dull and isolated room of theirs and become lonely. In such situations, coworking spaces come as a rescue. Here, they’d be offered a perfect working environment, i.e. the quietness while working, the discussion space when in need to collaborate with others (as it involves several kinds of people associated with different work nature), etc.
  • Also, a good deal of individuals visits coworking spaces so that they may be motivated by other employees of different companies. Working together with motivated individuals also helps to scrap loneliness. According to studies, approximately 45 per cent of coworking members reported that they found it as a valid option against the isolation and situations where they found it difficult to finish work in a standard, traditional office space or home office.
  • Primary users of these coworking spaces are the startups. The flexibility that coworking spaces provide to experiment and take risks makes them ideal for startups.

For Tenants/Employers

  • Coworking space asks only for minimum deposits yet provides abundant amenities at a cost less than what’s required to pay for traditional office space—thus making it a cost-effective and desirable option for the employers.

But, until there’s someone to build these spaces, there is no other way that employees or employers get to enjoy this newest type of working space.

Coworking as an Investment

Owing to the increase in demand in India, coworking is now one of the fastest-growing markets. This segment has also leapt the commercial real estate sector, and it has occupied more than 12-13% of CRE investments in India, as per reports suggested by FICCI. The scenario being such in India, it is already at its peak of growth in countries like the US, UK, Australia, etc.

With this history of high growth rate in the past and looking at the way it is booming, it proves that this trend is for sure going to take us by storm in the future.

This phase, thus, is the right time for the investors to march into this field.

Reason for the Escalating Demand for Coworking Space as an Investment

The main reason why coworking is gaining importance as an investment option is that it saves a lot on the investor’s part. Real estate costs can be 9 to 12% of the operation’s cost for an established corporate and even more for a startup. But with shared workspaces, they can save around 20 to 25% of the total real estate costs, and that is a lot of money for the big companies to count upon.

How do investments in coworking spaces work?

  • Investors can invest in coworking spaces in several ways.
  1. Directly invest, i.e. invest in a building to further develop into coworking space
  2. Through REITs investment
  3. Through online platforms
  4. Establish a partnership with another investor
  • Then they lease or rent their spaces to startups or established companies.
  • Finally, investors get to enjoy the enormous cash flow that the coworking spaces generate.

Key Considerations if You Want to Invest in Coworking Spaces

There are a few things that you need to consider before you directly barge into the investment.

Location

Location is of prime importance in coworking, just like any other real estate investment. The first step in selecting a coworking space is to find out the place that’s high in demand. The location should be easily commutable, a bit close to market places like those of suburbs or any prime urban areas.

Create Your Financial Model

Once you are done with the selection of the location, the next step is to calculate the costs and finalize the budget plans by making some assumptions and approximations. You will have to reconsider additional costs such as building codes and city permits, all things that can quickly add up to other charges.

Building codes will vary from state to state, so you must do careful research beforehand to ensure the coworking space complies with all building and fire safety codes. Code of Construction and Housing (CCH) sets standards for such coworking spaces, and they all must be built accordingly.

Coworking Space Design and Attractive Amenities

Space must be designed in quite an innovative way with good architecture so that it will make the workers there feel very much at ease and alive, unlike what the professional workspace makes them think.

Although it does not apply to everyone, many employees in coworking spaces are involved in technology or startup companies. Therefore, it becomes essential that you provide technology that is up to date and reliable for them to conduct their business. Additional amenities like lounges, recreational spaces, spaces for entertainment, etc. have the potential to lure new clients and tenants to your coworking space.

Good Partnership

If you want to invest in an existing coworking business and not start a new one, you need to establish a good working relationship with the co-existing owner of the space. This partnership will come with a massive set of expectations, responsibilities, and even complications, but establishing a positive dynamic with the existing management team will certainly help you bring overall success.

After reflecting on the points mentioned above, you can proceed with the funding for making a successful coworking space investment.

Wrap Up

To wrap up, coworking has the potential to bring the difference in the workers and investors lives. As far as workers are concerned, such spaces intend to provide them with a right and clean work atmosphere with all the modern amenities and not make them feel as like the traditional workspaces. Investors, on the other side, can benefit from this investment as like none other because it provides them with huge cash flow regularly. Done right, it can be the most fruitful investments of all.

FAQs:

Coworking is the arrangement in which several employees from different companies share an office space which is otherwise known as coworking space. This allows cost savings and convenience as they all use common facilities such as equipment, utilities, refreshments, and a lot more.

The coworking industry is now on boom in India. It’s one of the unparalleled and newest trends in India. It is on high demand in metro cities like NCR-Delhi, Mumbai, Bengaluru, and Hyderabad.

Yes, and the reason is that real estate can be 9 to 12% of the operation’s cost for an established corporate and these shared workspaces can save around 20 to 25% of real estate costs, and that is a lot of money for the big companies to count upon.

  1. Employee friendly- Generally, most people find it easy to work in places where they find some quietness. In such situations, coworking spaces come as rescue as here you’d be offered a perfect working environment, i.e. the quietness while working, the discussion space when in need to collaborate with others, etc.
  2. Tenant friendly- Also, the operational costs to run a coworking space is much less than that is required to run traditional office spaces.
  3. Owner friendly-Owners can avail the benefit of earning rents and leases.
Being such a good option for the owner, the customer and the employee, it’s now gaining demand and becoming a strong trend in the field of workspaces.