Co-working firms seek new opportunities to mitigate risk, remain afloat

As the pandemic-induced problems for businesses threaten to persist at least in the medium term and even as experts predict doom for the shared economy, the co-working industry in India is looking at new ways to mitigate risk, reduce cost and cooperate to stay afloat. Jolted by this disruption in the very first phase of its growth, the industry is also looking at newer opportunities that the crisis might create.

Just before the lockdown was announced in March, this section had discussed the threats for the model that relies heavily on relatively smaller enterprises taking up spaces to save fixed costs, and the immediate sanitation and hygiene solutions the co-working firms had put in place.

Since then, some of them have suspended operations temporarily and work from home (WFH) has gained currency. So how are these players gearing up to meet the new challenges as signs of the lockdown easing become apparent but public health fears remain intact?

 

A May 2020 report by Maple Capital Advisors — a New Delhi-based investment bank with focus on Indian mid-market advisory space — says, “With most centres shut, the managements are working on both demand and supply side to cut costs and optimise as there is significant cash flow impact owing to the lockdown.”

The report looks at the impact of Covid-19 on the co-working economy in India. On the supply side, the report says, co-working players are negotiating with landlords to waive rent or provide moratoriums, while on the demand side, these players are trying to maintain occupancy especially with larger clients given the lock-ins are typically longer, while engaging with SME and freelancers with future credits rather than refunds of security deposits. On the operations side, co-working players are streamlining workforce at centres and fixed costs.

Mudassir Zaidi, executive director (north), for global real estate consultants Knight Frank, says WFH is working well during the lockdown as employees have few distractions; but once it is lifted their productivity levels might slack off. But employees may have some reservations about going back to an organised set-up like an office, and that presents a key opportunity for co-working players. “For example, those in the tourism or aviation sector may plan to wait it out but for that longer contracts and heavy real estate costs are not feasible. They will opt for co-working, so will firms looking to decentralise operations from larger campuses — either to have fewer people congregating at one place or with the intention to reduce travel,” says Zaidi.

Ritesh Malik, founder, Innov8, echoes Zaidi’s views on business continuity being a factor and adds that new enquiries that have started pouring in are mostly for nine-18 month contracts. “To put that in perspective, earlier enterprise clients were looking at longer, three to four-year contracts,” he says.

Mitigating health risks of employees will be important in helping people take that key decision to step out of the security of their homes. Talking about the measures taken, Karan Virwani, CEO, WeWork India, says during the lockdown its workspaces were fumigated and sanitised thoroughly. “From a seating arrangement perspective, spaces in common areas and conference rooms are being reviewed and modified to ensure a minimum of six-feet distance between two people. We have also implemented mandatory temperature screening outside our buildings and all our members and employees will go through that check before entering the space.”

 

A protocol guidance explains to members the rules that apply to various containment zones and corresponding restrictions, the use of the Arogya Setu app, among other things. Additionally, it endorses a complete ban on outsiders including food delivery, avoiding lifts and allowing no activity after 7 pm. Players like Awfis also expect higher operating expenses as the firm upgraded its air conditioning technology to prevent the same air from circulating in the workspace to reduce the risk of infection.

Zaidi feels that because of the social distancing norms, companies will have to renegotiate the prices with their members sooner or later as the headcount will go down. But he also adds that the same logic (fewer people per square unit area) will apply to traditional offices, which means an opportunity for co-working.

ANAROCK Property Consultants is optimistic and says the industry will be one of the quickest to bounce back. “India’s co-working scene will pick up on exactly those fundamentals that work for it in other Asian countries — cash conservation, the need to re-deploy business operations carefully and remaining agile in the face of unprecedented changes,” says spokesperson Arun Chitnis.

All said, what is certain is that there will be some downward revision of the pre-Covid growth projections of the industry, agree the players. If it was predicted that the industry will grow five times over the next five years (100 per cent year-on-year), the players now say growth “will be more aligned with the new normal”.

“For the next 12-18 months, we may see operators adapting their product and growth strategies to the Covid-19 crisis, taking a slightly more cautious approach. Given it’s young and agile, I am positive the industry will start growing at a fast clip very soon,” says Vikas Lakhani, member, Indian Workspace Association.