Smart cities would trigger growth for co-working spaces
How has your business proposition evolved?
The virtues of the shared economy are indisputable. The value proposition was to get people to use industry space on a just in time (JIT) basis. We started with a booking app.
The next aim was to bring transparency. So, we went and contracted retail spaces at different locations, with tenures between 5-9 years. We learnt that there was ample supply available which gave us the scope to partner with specific landlords. These joint ventures with landlords are of two types – one where both parties put in capital and both split profits; and the other where we manage the location, without outlays, in return for a management fee. Today, around 50 per cent of our 21 locations across seven cities are through these two managed aggregation arrangements.
Today, we have 7,500 seats in 21 centres across five geographies. Our twelve-month target is 25,000 seats in 80 centres, touching the metros (Mumbai, Pune, Delhi, Kolkata, Chennai, Bangalore and Hyderabad) and two adjacent locations of Noida and Gurgaon.
Going forward, how do the industry dynamics look?
Shared workspaces model today is less than 1 per cent of the total commercial space. India has 500 million sq feet of commercial space of grades A and B across the seven metros, in which shared workspace is just 3 million. Over the next 3-4 years, this ratio should go upto 3-4 per cent to around 20 million sq feet, a 6-7 times growth in absolute terms from current levels.
We foresee maximum growth in Mumbai, Delhi and Bangalore, followed by Hyderabad and Pune. Currently, the user profile consists 60 per cent of start-ups and freelancers; 20 per cent of corporates and 20 per cent across startups and freelance workers, which should continue. In the corporate, we have serviced businesses like BNP Paribas, Accenture, Zomato, as well as manufacturing companies with factories in non-metro areas who are looking at space for sales or liaison offices.
What are the opportunities and constraints you see in the tier-II and tier-III cities?
Growth beyond the metros today does not offer the essential rental arbitrage which could justify the initial outlay, infrastructure expense and operational costs. That said, the list of 100 planned smart cities includes many tier-II and tier-III locations. With better power availability, road and wireless connectivity, business momentum would automatically catalyse favourable conditions for our industry.
How will the market evolve?
Today, the industry has evolved and the focus is all about working. A person spends 30 per cent of his time at his desk to get work done, and rest of the time goes into discussions, meetings, collaborations and brainstorming. Then it is imperative that the person is not tied to the desk. A person today aims to move across locations with meetings at different places and no stress involved. Any product offering must make working seamless. Devices have progressed. So the desk and chair must also evolve.
Can you give a financial perspective to your growth plans?
For us, FY 2017 saw a growth of 5 times over the previous year and we aim for a similar scale-up in FY 2018. By FY 2020, we aim for anywhere between 1, 50,000-200,000 seats where the average monthly realisation is Rs 10,000 per seat. It may be noted that we have generally achieved 90-100 per cent occupancy in any centre within 90 days of commencing operations.
Beyond routine business, which are the other opportunities which could help you improve your revenue?
Our basic offering is cabin space with wireless and credits for tea/ coffee, meeting room and printer usage. Beyond that we have alliances with Amazon, Google, and Microsoft etc, which are aimed at the promoter / CEO category. There is a system of office rewards for office staff, where we have partnered with Paytm, OYO, Faasos, Haldiram etc. Our own infrastructure services team offers services like video shooting, training space and event organisation. Leveraging our infrastructure enables us to create an office community ecosystem.