How shared spaces are making money?
The last two years have seen a number of shared workspaces shut their doors faster than they ever opened. This gives rise to the pertinent question – Do co-working spaces earn profits and how exactly do they gain profitable revenue.
Text: Leandra Monterio
The onset of the digital revolution has ensured that the traditional working environment will never be the same. Legacy offices are gradually giving place to co-working spaces. The developer is the supplier of real estate Co-working Company, the service provider and the corporates, SMEs and start-ups are the end consumers. Developers are building projects that cater specifically to the onset of the digital revolution has ensured that the traditional working environment will never be the same. Legacy offices are gradually giving place to co-working spaces. The developer is the supplier of real estate Co-working Company, the service provider and the corporates, SMEs and start-ups are the end consumers. Developers are building projects that cater specifically to the needs of this office segment. On their part, co-working providers are now involved at the construction stage to ensure that the facilities they lease are in line with their strategies. Likewise, there is exchange of ideas between a co-working firm and the end-user resulting in customised spaces to meet the need of the hour.
There are varied business models being adopted by co-working offices –
• The sub-lease model – Co-working company leases a space from a property-owner and sub-leases it to tenants
• The revenue-share model – property-owner makes the initial investment on the fit-out and becomes a business partner
• The traditional own-and-lease model
Apart from a few developers venturing into the coworking market, majority of the co-working companies operate around the first two business models. Smartworks, a co-working space provider primarily functions on the lease model.
Neetish Sarda, Founder of Smartworks shares, “We usually take bare-shell spaces on a long term lease from landlords. We then create and configure the space for enterprises and other companies looking for an agile co-working space. The duly fitted out spaces are then leased to these companies. The idea is to move beyond providing space as a rigid commodity and offer workspace as a service based on varied requirements.”
In terms of setting up a co-working facility, Meghna Agarwal, Co-founder and COO, IndiQube explains, “We acquire buildings which are usually popular landmarks in talent-friendly neighbourhoods and prime locations. Once acquired (usually leasing for a long term), the buildings are given a complete make-over, right from a new attractive facade to interiors that inspire creativity.” Awfis, a popular co-working space providers partners with space owners with unused commercial space on ‘no minimum guarantees’ deal – where the property owner makes the investment on infrastructure and builds a suitable centre. The profits acquired are shared with higher percentage going to space owner. Thus, the space owner not only gets occupancy for asset but also 20%-50% higher returns than market rentals. Higher returns proportionate the business risk which the owner is taking. Also read http://realtyplusmag.com/top-7-residential-realty-markets-driving-sales-figures/
Offerings for Occupants
Providing users an affordable and fullyfunctional work environment where they can learn and grow collectively, is one of the primary tenets followed by co-working companies.
Sudeep Singh, Chief Evangelist and CEO, GoWork illustrates, “The community is made up of users hailing from multiple backgrounds and sectors. Hence, the most crucial determinant of a co-working set up is the degree to which it addresses the needs of the community that works in it, not merely the physical space.” As the concept has become popular, variants of the fundamental model are cropping up. The space managers either focus on a particular unique-selling-point or combine many to create a service bundle.
“Whenever we enter a new market, we work together with our local partners to help create the WeWork experience in that region. All our workspaces are built keeping in mind the buildings and city’s history, further weaving elements into an overall idea for the aesthetics of the space. The Community Management teams running various locations are a huge asset,” explains Karan Virwani, CWeO, WeWork India. Also read http://realtyplusmag.com/a-successful-redevelopment-model-for-housing-societies/
Awfis has formed 100+ strategic partnerships under ‘Awfis Rewards’ that provide community members with seamless access to leading service providers in fields such as bookkeeping, legal, employment, payments, web services, mail management, healthcare and insurance etc. making it a one-stop-shop for all requirements of an emerging corporate’s set up.
“We see ourselves as the bridge between the supply and demand. We are continuously transforming our product & services to suit the end user’s evolved office requirements.” decrees Amit Ramani, CEO & Founder, Awfis.
The most common revenue generation model is through monthly rentals or pay-per-seat models. Membership fees vary based on the type and amount of services availed by the users, collected on a daily, weekly, monthly, quarterly or yearly basis. However, revenue statistics are subjective to each company
Monetizing the workspace
Flexible workspaces have undoubtedly been a game changer for the workspace dynamics with easy accessibility to Grade A infrastructure. Currently, co-working offices cater to different business requirements by offering variations like flexible seats to fixed seats, meeting rooms to premium cabins, hot desks, dedicated desks, and private offices However, many property-owners across Delhi, Mumbai, Pune and Bengaluru who either leased their spaces or have undergone a joint venture felt that the return on investment was not equal to the prevailing market rate and hence have discontinued the lease agreements.
While majority of co-working spaces may shut down there are some that are doing well and even expanding business. WeWork, is one such example of an expanding coworking space. They offer space-as-a-service by choosing strategic locations and technology to foster a mix of comfort, community, and productivity. Awfis’ revenue has grown substantially year on year since its inception about 3 years ago with the expected figure for FY 19 to be around Rs 170 crore. The company has already hit the profitability mark at entity level within the last 3 years. Smartworks is another profitable and agile workspace provider as their revenue and cost model has been designed in such a way that it has led them to break even of new centres in a short span of two years.