How coworking spaces are overcoming challenges to drive growth in India

06 September 2019

How coworking spaces are overcoming challenges to drive growth in India

  • Your Story

There are over 850 coworking spaces in India, and while most of these are concentrated in Delhi, Mumbai, and Bengaluru, over 179 are in Tier II and III cities. But despite the hassles of maintenance and operational expenses, the coworking sector in India is thriving and growing.

Coworking spaces today have become very popular and are seeing an exponential growth in India. In fact, India is the second-largest market for flexible workspaces in APAC, second only to China.

Anup Jain, Managing Partner, Orios Venture Partners, an early-stage VC fund, works out of WeWork, a coworking space, which has office spaces in Bengaluru and Gurugram. “It just makes it simpler. It is a good space, and we also get to work closely with startups,” he says. 

Anup adds that it also gives them the opportunity to collaborate, which cannot be found in single office spaces. “And not to mention that startup founders don’t have to worry and keep aside their already limited funds for operational expenses,” he says.

While coworking spaces were initially preferred mostly by smaller companies and startups, today they are also preferred by large and medium-sized businesses for their affordable infrastructure and business opportunities.

The space is also not restricted to larger cities, but tier II cities like Chandigarh, Ahmedabad, Kochi, Indore, and Jaipur too are following the trend. According to YourStory Research, there are over 179 coworking spaces across Tier II and III cities. 

As of August this year, coworking spaces raised $96.55 million across four deals. In 2016, the space raised $49.7 million across seven deals.

With India being called the second largest hub for startups globally, the coworking market is also saturated with players with different scale of operations.

Recently, OYO Hotels and Homes acquired Delhi-NCR-based Innov8 for Rs 220 crore, and made its entry into the coworking space.

New-York based WeWork, which is a major coworking player in India, recently filed its much-anticipated IPO prospectus, and rebranded itself as ‘The We Company’.

And it just isn’t just WeWork, CoWrks, Awfis or other larger players like 91Springboardthe Hike, InstaOffice; the space is seeing many new entrants.


Cash-guzzling operations 

According to Neetish Sarda, Founder, Smartworks, the operational challenges faced by most coworking spaces is to optimise the operational cost without compromising service their standards. They also look to standardise service offering across centres to deliver a better experience. This includes minimising turnaround time for resolution of client issues and attrition of blue-collar staff.

“There are significant operational costs (for coworking spaces) like managing people, getting the right mentors, and ensuring there are enough events and sessions around to help people collaborate. There also needs to be a strong team that manages each of the startups. It actually is more operationally intensive than one would assume,” says a real-estate builder from Bengaluru.

It is important for coworking spaces to be able to maintain a minimum occupancy level for most part of the year, and have a plan to expand in a strategic manner across geographies.

“One of the primary risks cited for all coworking players, including the large global players, is that the rental commitment to space owners is long term – over nine years – while the clients who occupy their spaces are generally for short to medium term (one month to three years). This results in capital inefficiency and demand-supply mismatch,” says Amit Ramnani, Co-founder and CEO, Awfis.

According to a JLL global survey, while the number of people opting for coworking space is on the rise, only around 40 percent of all coworking spaces are profitable. 

Just four years ago, this number was 32 percent. The survey also states that while typically most coworking spaces take a year to break even, turning profitable is a long journey.

What models work 

Sunanda Verma Bhatta, Co-founder, The Daftar, Pune, agrees that the business model of coworking is a little tricky as the operators buy long and sell short, and it is also a capital-intensive business.

“However, it is the case with all the business models having their pie of strengths and weaknesses. The idea is to maximise the strengths, and the best part of the coworking business model is that it is a cash flow-generating business, and hence can be developed as a great profitable business,” she says.

Amit says Awfis operates on a straight lease or managed aggregation model. He says currently only 30 percent of the seats are under straight lease model where they have taken up the property on a rental basis.

“We heavily engage with landlords under our Managed Aggregation Model (MAM). MAM is a unique business model that enables Awfis to partner with space owners of underutilised commercial spaces and strike a ‘no minimum guarantees’ deal – where space owner makes the investment on fit-out infrastructure and builds out a centre,” says Amit.

He explains that Awfis gets to acquire supply in an efficient way, which makes the model risk-averse and asset-light to a large extent. The owners not only get occupancy for their space, but also an opportunity to share the upside of our business.

“This also results in capital efficiency, which helps us to set up four-to-five seats for the same cost that other players use to set up one seat. Currently, 70 percent of our seats are under MAM, and we intend to increase it to 80 percent in the next 10-12 months,” says Amit.

On the other hand, Sudeep Singh, CEO of GoWork, says they don’t consider coworking as a merely infrastructure-based business that entails simply renting out spaces. He says their strategy is to enable coworking in its truest essence.

Explaining the strategy, Sudeep says,

“We are constantly creating more avenues such as introducing mentorship programmes for young professionals to enhance their skillsets, enabling investor relations, and facilitating B2B collaborations within the community to give young businesses what they’re seeking the most. Companies and individuals come to us not just for the amenities but also to benefit from the various programmes we run from time-to-time that help startups expand their network and scale.”


Differential pricing options 

While the models may be different, ultimately, it is to ensure they have a wider range of consumers and businesses. Generally, the price per seat per month ranges from Rs 10,000 to Rs 45,000, accommodating smaller startups to larger companies.

Oyo Rooms, which has also ventured into the coworking space market with Oyo Workspaces, is currently looking at three segments – low, mid, and high range.

In total, Oyo Workspaces is looking to immediately open its premises to over 21 centres with over 15,000 seats across 10 cities. The team already claims to have clients like Swiggy, Paytm, Nykaa, OLX, Pepsi, and Lenskart among others.

Companies like Paytm Mall, TVF, CS Direkt, TBO, and Coverfox are currently operating from the GoWork campus. And Awfis has the likes of Syngenta, Dun & Bradstreet, Duff & Phelps, Hinduja Global Services, Vodafone, Reliance, Hitachi, Blazeclan, Zomato, and Practo.

“This is the next phase of the coworking spaces, where everyone understands the value and even larger companies are looking at these for opening smaller offices,” says Anup.


A better option?

Despite these challenges, multiple factors are driving the flex workplace space in India.

One of the reasons being real-estate costs becoming significantly cheaper in this setup, which also enables fractional ownership.

“It is like Uber and Ola. People now can own a small ride and don’t even need to spend lakhs to buy a car,” says Anup.

A JLL, CBRE report says, coworking spaces have disrupted the commercial real estate segment in India with approximately 325-330 coworking operators in the top cities, and the average transaction size increasing from 52,000 per sqft in 2018 to 77,000 per sqft in Q1 of 2019.

Over 13 million people are expected to work out of coworking centres by 2020, with many corporates expected to allocate 10 percent of their office portfolio to agile workspaces.

And this can be attributed to its affordable pricing. For rents starting at Rs 10,000 per seat per month, shared coworking spaces offer several businesses lower utility bills and operational costs, and the advantages of collaboration and learning.

“Shared workspaces have created a transparent relationship with both the landlord as well as the end consumers. They provide unparalleled flexibility and mobility to their users,” adds Amit.

But while the demand is growing, the going is getting tougher. So, what do coworking spaces need to do to stay relevant? With the industry expected to reach a valuation of $2.2 billion by 2022, it sets a strong tone for growth within the sector.

In addition to this, Tier II cities are expected to grow to 8.5 million seats by 2020, and thereby result in further growth for coworking spaces.

In an earlier report, Samantak Das, Chief Economist and Head of Research and REIS, JLL India, said, “While coworking companies took up a modest 0.17 million sqm in 2017, the first quarter of 2018 itself has exceeded the annual tally of 2017 at 0.19 million sqm. The expansion plans of major players and the increasing appetite for this format from occupiers, property owners, and coworking operators should see annual transaction numbers triple from current levels over the next three years.”


What the future holds?

Currently, Awfis has 30,000 seats across 63 centres in nine cities in India, and is looking to reach 2,00,000 seats by 2022. It is also planning to tap Tier II markets like Bhubaneshwar, Kochi, Indore, Jaipur, and Ahmedabad. It claims to be profitable at an entity level since 2018, and plans to release its IPO by 2022.

Elaborating on GoWork’s plan, Sudeep says: “We plan to expand across the country with 50 campuses over the next five years with an immediate focus on Delhi-NCR, Bengaluru, and Mumbai, which have a thriving startup environment. We estimate the coworking industry to grow at a minimum rate of 33-35 percent YoY. Our strategy is to therefore let other players in the industry expand, settle down, and saturate, before we step in and take on the swiftly growing demand.”

India is the world’s youngest startup nation with more than 70 percent founders under the age of 35 years, and for the millennials, workspaces need to enhance creativity, contribute to collaboration and networking, offer flexibility, adopt latest technologies, and yet be affordable.

Rising to the occasion, that is precisely what coworking spaces are offering.

Please visit the below link to read the published article:

https://yourstory.com/2019/09/wework-cowrks-awfis-coworking-spaces-thriving-challenges

Co-working space provider Awfis raises $20 M from Sequoia, others

26 July 2018

Co-working space provider Awfis raises $20 M from Sequoia, others

  • Posted by Awfis Editorial

New Delhi-based co-working space provider Awfis has announced raising $20 million in Series C funding. Existing investor Sequoia Capital was joined by Innoven Capital and The Three Sisters Institutional office in this round. The startup now has more than $50 million in total funding.

A press release from the company states that the fresh capital will be used to deepen the Awfis network across India. They will also launch new and innovative products/services and improve the technology platform.

Founded by Amit Ramani, Awfis was incubated by TTS:IO with $11 million in April 2015. The company claims that in the last fiscal year, it scaled up to 25,000 seats across 55 centres with more than 15,000 members, as compared to 5,800 seats in 20 centres with more than 4000 members in July 2017.

The press release says that Awfis’ customer base includes more than 1,200 companies, including India’s leading startups/MSMEs and Fortune 500 companies. Their clientele includes Vodafone, Mercedes Benz, RBI, Hitachi, ShareKhan, Zomato, and Practo among others.

A Knight Frank report adds that despite the demand for co-working space, there are several challenges that have to be tackled; for instance – changing the conventional mindset of a client who would want to book a meeting room based on the touch and feel factor, rather than an app.

However, Awfis has gone an extra mile. With more than 100 strategic partnerships, Awfis enables its community members to access service providers in accounting, legal, recruitment, payments, web services, mail management, healthcare, insurance etc.

Abhay Pandey, Managing Director, Sequoia Capital, India, has said in the press statement, “We are thrilled with the demand side traction for Awfis product, especially from SMEs and Corporates, thereby validating our hypothesis of a massive market opportunity. Awfis has generated tremendous momentum with its unique supply acquisition models. It is re-creating the workspace landscape for the benefit of both tenants and landlords. Sequoia strongly believes in the opportunity created by Amit and the team, and will continue to back Awfis to retain its leadership position in the Indian shared workspace market.”

Awfis follows an asset light ‘managed aggregation’ model – partnering with space owners who have unused commercial space and transforming them into workspaces. This includes under-utilised spaces in hotels and malls.

Awfis has inked lease deals totaling to 0.25m sq. ft. in the last 60 days across Hyderabad, Kolkata, Chandigarh, and Noida.

The company currently has a total footprint of 1.5 million sq. ft. across its 55 centers across nine cities. In the future, the company intends to maintain 60 percent of inventory under managed aggregation model and the rest under straight lease model.

Amit Ramani, Founder & CEO of Awfis has stated, “With the growing demand for co-working spaces, there is a focus on transforming under-utilised real estate assets and providing affordable workspaces for entrepreneurs. The additional capital will aid us in expanding our footprint in India with more than 100 centers with 40,000 plus seats in the next 12 months. Our priority is to deepen the penetration in the existing markets, and enter new cities with a focus on Tier II locations.”

Awfis competes with WeWorks, Cowrks, 91Springboard, Bhive, and Smartworks, among others.

To read the published article visit the below link:
https://yourstory.com/2018/07/co-working-space-provider-awfis-raises-20-million-from-sequoia-others/

Housing MNCs to SMEs, Awfis makes room for every office user

15 June 2018

Housing MNCs to SMEs, Awfis makes room for every office user

  • Posted by Awfis Editorial

Started in 2015, Awfis is a co-working space that has over 20,000 seats and clients that range from SMEs, startups, to large companies. 

At a glance:

Startup: Awfis

Founders: Amit Ramani

Based out of: Delhi-NCR

Year it was founded: 2015

Funding: $20 million Series B led by Sequoia Capital

Sector: Co-working 

Problem it solves: Office space and rentals 

A large San Francisco-based company was looking to set up an office in Hyderabad. The headquarters boasted of a swanky space, and its Hyderabad presence had to match up. While setting up an office seemed like the course of action, the team felt the need for a more flexible and economical way of working. Enter Awfis. 

Taking away setting-up hassles like extensive costs, and dealing with real-estate developers and interior decorators, co-working spaces are making life easier for companies. Awfis was started around 2015-end by Amit Ramani, who had earlier worked with US-based realty company Nelson; and YES Bank CEO and Managing Director Rana Kapoor.

“In 2014, when I was in the US, I noticed the work trends there, and how the co-working models worked in the market. I wrote a business plan on my flight back. After that, I met Rana, who I knew earlier, and we got a seed investment of $3 million. Rana and me pooled in our resources and pumped in $11 million and started Awfis,” says Amit. 

Last year, Awfis raised $20 million in Series-B funding led by Sequoia Capital. It was touted as one of the biggest investments in the co-working space. Awfis’ premise was simple – there was demand for quality infrastructure, which wasn’t available, and it would provide it. 

The premise

Amit explains people who were looking for a few hundred seats were stuck with real estate developers who had a 20,000 sq ft floor plan, and were inflexible. Apart from this, there was five-year lease periods, lock-in periods, security deposits – the list was endless. 

Also, one doesn’t get the space where they need it. “There is also a certain trust deficit and lack of transparency while working in the real estate sector. Accessibility, flexibility, and transparency can convert a conventional office user into an Awfis user,” says Amit. 

Until early this year, the team was operating in over 50 centres in eight cities. They launched co-working spaces simultaneously in Delhi, Mumbai, and Bengaluru as of March 2018, and they have over 20,000 seats. 

Amit says they realised early that a co-working space was a supply play, and not a demand play. Initially, when the team met the developer community, the latter was resistant to the idea. When they said there would be no security deposits and other lease agreements, and the developers would make money when Awfis does, all of them showed the team the door.

Building the model

In the early days, the founders decided to lease the space themselves and then rent out seats. With time, they decided to move into two different models – a joint venture (JV) model, where Awfis will lease the space and rent seats. The second model is a management operator model, where Awfis works like a managing operator, and takes a percentage of the revenue. 

Today, they run on a 50:50 ratio, but want to shift to a 70:30 model, where 70 percent would be the management operator model. Amit believes this model will help stretch the capital further. 

“I am not trying to pretend I will create a demand for the next new micro market. I don’t have the ability to create a controlled real-estate space, and somebody has already done that. What I can do is provide the infrastructure at cost-effective prices, where I can attract the demand,” says Amit. 

He explains that people primarily choose Awfis for the flexibility it provides. They are able to reduce costs by close to 30 percent by following the seat model, says Amit. He adds that Awfis’ ability to get the supply is better, as the team ends up buying close to 25,000 seats, and the companies, in turn, use what they want and save money. 

Numbers and market 

Currently, more than 70 percent of Awfis’ clients are medium and large sized companies. Vodafone, Sharekhan, Mercedes Benz, Orange Business Services, Zomato etc., have taken up spaces at various Awfis centres across India. 

Vodafone shared services team has taken up 380 seats at Awfis’ Pune centre.

“Sharing assets across categories is a huge trend, and we believe office spaces will be no exception. The real value will come from network effects, as companies expand and scale up. The key capabilities that Awfis brings to the table are deeply-penetrated sales engine for asset owners, and efficient design and quality at reasonable prices for tenants and community members,” says Abhay Pandey, Managing Director, Sequoia Capital. 

Currently, the co-working concept is fast catching up in India. Awfis has several competitors like 91springboard, WeWork, BHIVE, AltF Co-working and many others. WeWork has so far raised over $7.65 billion, and has a strong presence globally. Amit believes they are different, thanks to the model they follow, and adds that most co-working spaces are following a lease model now. 

He says they have been profitable in every centre for more than three years now. Amit, however, refused to elaborate on the numbers. Awfis hopes to expand to Chandigarh, Ahmedabad, Jaipur, Kochi, and Indore in the near future.

 

View this article from the below link:

https://yourstory.com/2018/06/housing-mncs-smes-awfis-makes-room-every-office-user/

Myntra builds on its omnichannel retail with tech-enabled stores; Awfis makes room for every office

15 June 2018

Myntra builds on its omnichannel retail with tech-enabled stores; Awfis makes room for every office

  • Posted by Awfis Editorial

Online fashion commerce market leader Myntra is set to launch 50 brick-and-mortar stores in two years for its private labels, across cities. Mytra-Jabong CEO Ananth Narayanan has said 15 of them will be opened in this fiscal. This is Myntra’s latest effort in pushing omnichannel retail, by enabling offline stores with advanced tech for better customer experience.

Taking away setting-up hassles like extensive costs, and dealing with real-estate developers and interior decorators, co-working spaces are making life easier for companies. Awfis was started around 2015-end by Amit Ramani. Last year, Awfis raised $20 million in Series-B funding led by Sequoia Capital. It was touted as one of the biggest investments in the co-working space.

A big podcasting wave has gripped the world over the last few years. Podcasting ad revenues have grown in double digits from $69 million in 2015 to over $220 million in 2017. Apple Podcasts continues to lead the market. Its biggest challenger is Podcast Addict, the #1 podcast app on Google Play Store. As of 2017, Podcast Addict had notched up a billion episodes, over 8 million downloads (on iOS and Android put together), nearly half a million reviews, and an average rating of 4.6 out of 5.

India’s grocery market – now worth $600 billion – is the sixth largest in the world.  Both wholesalers and retailers are now opening up to the possibilities of online purchasing. To enable HoReCa (hotels, restaurants, and cafes) businesses, retailers, and suppliers with better margins, quick turnarounds, and smaller inventories, a bunch of startups in India are using advanced technology.

View this article from the below link:

https://yourstory.com/2018/06/myntra-omnichannel-retail-stores-awfis-coworking-space-daily-capsule/