A few smaller developers are in talks with providers of shared working space as they seek to monetize underutilized commercial assets.

Shared working space, a concept popular among start-ups and entrepreneurs in the West, is starting to find takers in India.

A handful of smaller developers have initiated talks with providers of shared working space as they seek to capture the trend and monetize underutilized commercial assets.

US-based office rental firm WeWork, which announced plans to enter India on 15 January, is in talks with developers including Bengaluru-based RMZ Ltd and Embassy Group, Mumbai-based Wadhwa Group and K Raheja Corp., according to people involved in the discussion.

The Wadhwa Group, which operates high-end commercial office buildings in Mumbai’s Bandra Kurla Complex (BKC), confirmed that it is in discussion with the New-York based firm.

“It is at discussion stage right now,” said Navin Makhija, managing director, Wadhwa Group, refusing to divulge further details on talks with WeWork.

Spokespersons for RMZ Ltd and K Raheja Corp. declined to comment.

“We have no comments, confirmations or announcements at this point,” said a spokesperson for Embassy Group in an email response.

Similarly, a spokesperson for WeWork said, “We have nothing to share at this time but we’ll be in touch if this changes,” in response to an email query sent on 14 January 2016.

Some deals for shared office spaces have already been closed.

Last month, Mumbai-based Hubtown Ltd, formerly known as Ackruti City Ltd, partnered with office service provider Awfis Space Solutions Pvt. Ltd to create a co-working office at Akruti Trade Centre, a commercial property owned by the real estate firm in Mumbai’s Andheri East.

Awfis Space Solutions will convert the 12,000 sq.ft space into a 200-seater office area targeting start-ups or those looking for a flexible workspace for a limited period.

With a minimal fee ranging between Rs.400 per day for renting a desk to as much as Rs.13,000 per month for taking up a private cabin, tenants can have access to facilities such as a common cafeteria, meeting rooms and other office facilities within the building.

Hubtown, which has entered into a revenue sharing model with Awfis Space Solutions, expects the concept of shared workspaces to catch up in the next three to four years and says that it is looking at replicating the model in other buildings as well.

“It is a new concept in India. It is a bit of risk but globally it has worked pretty well, particularly in the US for the last four-five years. One thing that works with this model is the utilization of space. It is easier to give the space that is lying underutilized,” Rushank Shah, promoter and director at Hubtown Ltd, said.

Awfis Space Solutions has also leased around 10,000 sq.ft of space from Poddar Developers in central Mumbai’s Lower Parel area, where it is currently operating a 230-seat co-working office.

Around 30% of the total seats have been occupied in a span of less than two months since it began operational in December last year, said Amit Ramani, co-founder, Awfis Space Solutions.

“Historically, the idea of shared workspaces was more about a providing short-term solution by developers for their long-term clients. They would rent out a small area, provide them an incubation space for a few months or a year till the building is ready. Now they (real estate firms) want to run this as a business,” said Ram Chandnani, managing director (transactions), CBRE South Asia Pvt. Ltd, a real estate consultant.

The concept, however, will work better in some markets and areas than others.

Wadhwa’s Makhija said the concept of shared workspaces will find more takers in tier II and tier III office buildings where the rentals are relatively low. It will be a challenge to popularise such a concept in high-end buildings. Ramani agrees that grade A office spaces are not suitable for shared office spaces.

Mumbai: Shopping malls, particularly underperforming ones, are becoming a favourite destination for setting up shared office spaces. Cheaper rentals, availability of large spaces and easier access to recreational facilities in shopping complexes are luring co-working office providers to malls. For co-working office providers such as Awfis Space Solutions Ltd, IWG Plc, The Hive and SmartWorks, shopping complexes provide one of the fastest and efficient ways to open co-working offices.
Apart from getting attractive deals, such retail destinations offer the right setting for an informal environment, a theme most co-working spaces thrive on, said executives of these companies.
Shared office provider SmartWorks Ltd is in the process of converting Pune’s Central Mall, which has been shut for the past two years, into a co-working office.
Nitesh Sarda, founder, SmartWorks, said the company is currently in talks with more than 20 landlords of the 120,000 sq. ft shopping complex to convert it into a co-working office.
He expects to start work on the complex in two-three months.
“Firstly, malls are now open to the idea of converting into a commercial space. There are a lot of collaborative areas that are designed in a mall which is quite attractive. Location is a big factor and some of the older malls are located right in the residential pocket,” said Sarda.
Awfis Space Solutions has opened co-working offices at five shopping malls in Mumbai, Pune and Gurugram.
The firm has chosen malls where footfalls have significantly dropped in 2-3 years or are under-utilized areas in a shopping complex to open shared office spaces.
For instance, Awfis operates a 30,000 sq. ft co-working office on the sixth floor of Ambience mall at Gurugram. Besides, it has also opened centres each in Raghuleela and Heera Panna mall in Mumbai and Nucleus mall in Pune.
According to Sumit Lakhani, chief marketing officer, Awfis, the higher floors of mall which are less popular among retailers provide an attractive deal to set up such shared offices.
“The rental difference between ground floor and higher floors is 35-40%. Access to parking spaces and security system are also well taken care off. Besides, most malls are generally located in some of the best locations around,” he said.
Luxembourg-based International Workplace Group (IWG) operates four Regus business centres out of shopping complexes in Delhi, Noida, Bengaluru and Chennai.
It has also recently opened a co-working office under the brand SPACES at City Centre mall in Chennai.
“Co-working is still looked at as an informal work space. Several firms may not like to associate with a mall as a workplace but for a co-working office, malls provide the right setting. Abundant parking spaces, along with a good amount of food and beverage areas within a mall, becomes a good fit for setting up co-working offices,” said Harsh Lambah, country manager (India), IWG.
For developers, leasing out to such office providers allows them to utilize areas in a shopping mall that are less popular among retailers. “A mall makes a whole lot of sense for co-working office providers. They don’t have to invest anything on food, entertainment and other facilities. Besides, for malls, it provides captive customer inside a mall,” said Pankaj Renjhen, chief operating officer, Virtuous Retail, part of private equity firm Xander Group.

Xander’s co-working office venture, The Hive, operates two centres at its two VR malls in Bengaluru and Chennai.

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Shared workplace start-up Awfis Space Solutions will use Sequoia Capital’s $20 million investment to fund its expansion plans

Awfis Space Solutions, a start-up that provides shared workspaces, has raised $20 million from Sequoia Capital India to fund its expansion plans.

Awfis, which operates 21 workplaces across the National Capital Region (NCR), Bengaluru, Mumbai, Hyderabad, Pune and Kolkata, will use the funds to expand to more than 100 centres in two years, the firm said. It plans to raise the total seat count in its centres to 35,000 from about 7,500 now.

Sequoia’s investment displays the growing investor interest in the area of shared offices, which has seen a number of branded co-working facilities mushroom in metropolitan cities in the past few years.

Currently, the biggest entities in the segment are 91springboard (present in NCR, Hyderabad, Mumbai and Bengaluru), Y Combinator-incubated Innov8 (Delhi, Chandigarh and Bengaluru) and InstaOffice (Gurgaon, Bengaluru and Delhi), besides smaller region-only firms like CoWork India (Bengaluru), AltF Coworking (Delhi and Gurgaon) and Blume Ventures-backed BHIVE (Bengaluru).

WeWork, a leading shared workspace provider with a presence in 15 countries, has also entered the subcontinent.

The New York-based firm will open its first centre in Bengaluru this year and has leased a 16-storey building, representing almost 190,000 sq. ft area, in Mumbai’s Bandra Kurla Complex, Mint reported in January.

Awfis, which opened its first facility in Delhi in 2015, is a joint venture between Amit Ramani, the founder and managing director of real estate design consulting firm Nelson India, and The Three Sisters: Institutional Office, a family-run investment firm managed by Yes Bank founder Rana Kapoor’s daughters.

Both parties had invested $11 million in Awfis in April 2015.

Awfis has since expanded its footprint to six of the eight metros in India, with a facility in Chennai expected to come up in three months, CEO Ramani said.

He said the focus is to place smaller co-working centres in the vicinity of the user rather than to have fewer big facilities. “We have identified a sweet spot of 350-400 seats per centre, where our unit economics works and this kind of scale gives us the best-suited setting for a community-based environment,” Ramani said.

Awfis co-working centres are typically of the size of 15,000-20,000 sq. ft. and offer facilities like high-speed internet, video conferencing and printing and have cafeterias.

The space is rented out on a per-seat per-month basis. One seat is priced at Rs3,500-5,500 under the flexi plan (where the seat position is not defined) and Rs8,500-10,000 for a fixed seat. A seat in a private cabin starts at Rs13,000; besides clients have the option of booking an entire cabin or meeting room.

Awfis takes a property on lease typically for a five-nine year period and invests in its renovation and refurbishment. It has also deployed what it calls a ‘managed aggregation model’ wherein the property owner offers its property to Awfis for no upfront cost and takes a higher share of the revenue.

Ramani said that over 50% of its facilities are on the latter model and expects to sign up at least 70-80% of the new properties on this model. He claims that Awfis spaces see about 90% occupancy.

(This Awfis coverage appeared on April 26, 2017 in Mint newspaper. You can access the original story here: http://www.livemint.com/Companies/0FWcMgxPD02MyvDjl2gOEL/Sequoia-Capital-invests-20-million-in-Awfis-a-shared-works.html )