[ecis2016.org] While the co-working segment in India has been growing exponentially, there’s a good chance that this pace of growth will lead to consolidation in the segment, sooner than later
The co-working industry in India is growing steadily, accounting for more and more of the commercial rental transaction deals. As per industry estimates, there are about 450-500 small and big operators who are trying to get clients that range from freelancers to startups, to large companies. The presence of a large number of operators is likely to lead to consolidation sooner than later since there are various dynamics attached to the industry and they mostly work in favour of the large operators.
You are reading: Consolidation in the co-working industry can happen sooner than later
The co-working operators accounted for about 7 million square feet of rental transaction in 2018, sharply up from around 1.7 million square feet in 2017. A number of foreign co-working players have also entered the Indian market and are expanding at a dizzying speed. There are a number of big real estate players in India that have also joined the bandwagon in a big way, either on their own or with a tie-up with a foreign player. The industry is growing at the rate of about 40 per cent in India, much faster than any other country including the USA.
Large versus small players
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Regus, Avanta and WeWork are some of the foreign players that have entered India. Then there are Indian real estate companies like Embassy Group and K Raheja Corp that have also lined up their co-working offerings. Then there are several smaller players that have just a few hundred or a few thousand square feet of operations. The smaller players are charging as low as Rs 2500 per seat per month while the bigger players are charging as much as Rs 40,000 per seat per month.
Since the dynamics of the industry favour scaling up and many other aspects, the larger players are likely to acquire the smaller players in the near future, according to industry experts.
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Various attributes required by co-working players
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Co-working spaces have to infuse technology, new and innovative design and impeccable customer service to survive. They also have to do a lot of community building and have to line up special events on the premises from time to time. These aspects make it difficult for smaller players to be in the reckoning.
Some of the smaller players have already downed their shutters and the wave of consolidation may take up may more in the near future, say the experts. There are also aspects of the retail industry involved in the co-working space. There are hospitality traits involved as well. Smaller players lack the bandwidth to be championing in both. Then there are legal formalities and compliance risks which make it more difficult for the smaller players.
The ability of marginal operators to acquire clients has also been in question lately. It also makes sense for bigger players to acquire the smaller ones in their bid to scale up fast. The large ones have been doubling their seat count every six months in India, in the last few years.
Source: https://ecis2016.org/.
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Source: https://ecis2016.org
Category: Lifestyle
