HomePost-COVID world: Co-working sector seen benefitting from social distancing rule at work places

Post-COVID world: Co-working sector seen benefitting from social distancing rule at work places

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By Shruti Mishra  April 12, 2020, 6:53:22 PM IST (Published)

Post-COVID world: Co-working sector seen benefitting from social distancing rule at work places
Like nearly every other sector, the fledgling co-working space too has been hit hard by the nationwide lockdown in the wake of the coronavirus pandemic. With occupancy levels at zero, and many tenants giving force majeure notices, co-working spaces in turn are negotiating leases with landlords to make up for the loss of revenue.


Already, net absorption--which is the the new square footage leased minus the square footage unoccupied--has fallen by 30 percent during the recently ended quarter. Industry experts  feel it could take at least six months for things to get back to where they were.

"Freelancers and smaller early startups have started giving us force majeure notices," says Ritesh Malik, Founder of Innov8, which has 19 co-working centres across 7 cities. But he has reasons to be sanguine.

"We understand they (smaller customers) will not be able to pay during this crisis., but we also have large enterprises which are deep pocketed and who will need business continuity once the lockdown is over," Malik says.

It is a similar situation at Awfis, which has 67 co-working centres across 10 cities.

"Clearly there is a bit of challenge for April," says Amit Ramani CEO, Awfis, adding, "there are discussions around waiver and discounts. We are working with our landlords and our customers at the same time."

Ramani says he is trying to work out something so that any concessions he is able to get from his landlords can be passed on to his customers.

"50% of our business comes from large enterprises which are more stable and long term, 35% comes from SMEs and 15% comes from startupsThere are certain fixed and variable costs, most of our large customers are open to discussions," Ramani said.

And while there is no denying the short term pains the co-working sector is grappling with, there is a growing view that the sector will most likely benefit from the changed rules at work places even after the lockdown lifts.

For one, it is widely expected that social distancing will remain in effect for a while. That means offices will not be able to accomodate its entire workforce under the same roof. Already, the Confederation of Indian Industry has forwarded a list of recommendations to the government on guidelines for workplaces post lockdown. Among the things it has suggested is that  all meetings should continue to happen virtually and all group gatherings should be avoided.

Ramani is hopeful of a sharp recovery once the lockdown starts lifting, a view shared by Pranay Gupta, co-founder of 91springboard, which has 28 co-working centres across cities.

"We have started receiving calls from people saying they are looking to move out of their current premises to save on costs," says Gupta.

"As they are unable to predict how much space they will eventually need, they are ready to be in a variable structure in a co-working space. Long term, this trend is superb for the sector," Gupta says.

Also, the work-from-home experiment, even though a compulsion than choice, appears to be working well for many organisations in which the non-essential functions can be done without those staff having to be in office.

Aditay Puri, CEO of HDFC Bank are among those who feel that many people should continue working from home even after the lockdown ends.

"Approximately 33 percent of our people are working from home now, I see no reason why they shouldn’t continue (working from home) even after corona virus ends, " Puri had said in an interview to CNBC-TV18 two weeks back, adding that it was helping the bank in cutting costs.

And while most employees in most service sector organisations are working from home, India Inc still needs to tweak its business continuity plan.

Awfis' Ramani believes this requirement will lead people back to shared working spaces and work with flexible options.

" If you see developed countries like the US, out of 100 million people, 5 million work from home," Ramani says. He expects a simialr trend in India as organisations too be supportive of it because of cost savings.

Should this trend gain momentum, the 400-odd player co-working space industry too needs to prepare itself for the increased demand. Also, the need for social distancing could be a double-edged sword for the industry. On one hand, it will have more organsations pushing their staff to work from a place of their choice. At the same time, co-working spaces too will have to make changes at their end as well

Akshay Lakhanpal, Regional Managing Director, India at Space Matrix believes that a complete overhaul will be required to co-working set-ups on two fronts.

"Social distancing would mandate the density in the open work stations," he says.

"While the desk sizes have reduced to 4-5 feet, occupants would need to sit 6 feet apart. For new centers these will be the standards and accordingly the business model would need to be tweaked," he says.

Also, current air conditioning systems are ineffective in reducing air borne infections/viruses.

"Post the AQI (air quality index) drop in metros over the last few years, newer systems to take care of air quality are being installed but they would now need to be upgraded to take care of air-borne viruses," Lakhanpal says.

Additionally, the air conditioning systems are not currently designed to take the air back to the central unit for each office in the co-working set up, he says.

"It gets mixed and then is taken back. This would need to change to ensure there is no cross contamination between offices within a co-working setup.," Lakhanpal says.

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