Co-working Ecosystem – A New Innovation in Real Estate
New Innovation in Real Estate

The adaptation of co-working real estate in India began in 2013 and is growing at a much faster rate as compared to global trends. The development and growth in global co-working operators have led to the expansion of this segment in India. The co-working spaces have gathered significant momentum and this has increased the demand of start-ups and SME’s. This fast growth has attracted many big players to considered managed workplaces as the investment option. The benefits of such commercial hubs can only be enjoyed with the strong support of economic fundamentals and positive interest in funding the start-ups. India is the second-largest co-working in the APAC region with a market size of 16 million as of 2019. With more than 400 shared workspaces including start-ups, freelancers, SME’s and enterprise customers, the penetration of this innovation is increasing day by day.

New Innovation in Real Estate

As the co-working presence increases, the real estate developers and stakeholders are exploring different models of this segment. Typically, there are three operating models in the co-working ecosystem namely sub-leasing, revenue sharing and own & operate models. Each of the model, promises to deliver its unique advantages.

Sub-Lease Model – This is the most commonly adopted model in India. In this, the managed space provider signs a long-term lease with the owner of the property. The provider then further sub-leases the co-working space to the end-users. In this kind of agreement, the property owners are at a low risk as the direct rental incomes continue to be received by the operator.

Revenue Sharing Model – In this type, the property owner and the third-party operator collaborate and agree to develop a managed workspace. The initial investments are provided by the property owner while the operator manages the spaces leased to the end-users. The revenue generated is divided by the owner and the operator as per the signed revenue-sharing agreement.

Own & Operate Model – The property owner creates and operates this type of co-working space. While this model burdens the owner and is not a preferable model. Typically, the owner lacks the management expertise and without the help of the operator could incur losses.

Apart from these, the co-working segment is moving towards more innovative business models. Major companies are scaling up to use and created sub-segments of managed workspaces. The new opportunities are witnessed in the Indian co-working ecosystem like

  • Local real estate developers are collaborating with the international co-working operators
  • Few big players of Indian real estate are setting up their co-working, commercial hubs and SEZs. The Mentor Group is one such leader in North India.
  • The co-working operators are further collaborating and acquiring other co-working start-ups
  • Even the retail developers are establishing co-working spaces to expand their business
  • Other industries like hospitality are identifying new solution to enter into co-working spaces.

The co-working spaces are deriving the corporate sector by offering cost savings, scalability and flexibility. The ease of transaction and business is another factor that is attracting the real estate developers and investors for funding these models.

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