Omicron forces co-working space providers to sweeten deals
Co-working space providers are increasingly offering more flexible subscription plans to stay competitive in a highly evolved hybrid work model amid the uncertainties associated with the corona virus pandemic.
This is a smart move by the sector, which saw a sharp drop in leads and inquiries in the early days of the pandemic in 2020, when most corporate took a cautious approach.
Businesses have been skeptical about long-term commitments since the start of the latest outbreak of COVID-19, tied to a highly permeable version.
“We see that all occupants are now seeking contractual flexibility – this is clearly spelled out in the agreement as to what will happen in case of the next lockdown,” said Sumit Lakhani, Chief Marketing Officer, Awafis Space Solutions.
Some co-working space has also started offering discounts in lieu of extended lock-in period. Sanjay Chatrath, Managing Partner, Incuspase said, “We have started offering flexibility in terms of shorter lock-in periods and lower one-time termination fees, and are open to customer requirements, which is not available with traditional real estate players. "
Co-working spaces, which used to require a minimum of 200 to 250 seats on demand, are now welcoming smaller groups requiring 10 to 100 seats.
“There is flexibility in terms of team size. We have just a 10-15-member team and we can use our co-workers' space any day of the week,” said Shelly, an employee of the architecture firm Beta Makers Lab.
Others are now offering month-to-month rollover of the lease instead of a fixed lock-in period for the occupier. "It allows the occupier to withdraw from the lease with only one month's notice," said Bappaditya Basu, chief business officer at Anarock Commercial, a real estate consultant.
There has also been increased flexibility among co-working space providers and real estate developers to deal with the uncertainty associated with Omicron.
For example, flex space providers themselves are requesting real estate firms to reduce the security deposit over a period of time to ease their financial burden at an initial stage, Basu said.
With the flexibility, it is possible for businessmen to outsource the entire real estate to workspace managers and opt for a hybrid work model that is economical for employer and employee.
Vimal Nadar, Senior Director and Head of Research, Colliers India said, “Developers and landlords have acceded to the demands of the occupiers for facilitating deals with regard to lease tenor, rent-free period, termination clauses.”
Workspace providers have also switched to a risk-adjusted approach.
“Operators now look to acquire property only if they have 50% of the demand secured,” said Karan Singh Sodi, regional managing director – Mumbai, real estate consultancy JLL India.
Such contractual flexibility on all sides is good news for the sector, which is expected to double in five years from 35 million sq ft with a compound annual growth rate of 15%.