Coworking spaces are gaining popularity in Tier 2, 3 cities of India

While demand for traditional office spaces is perhaps at its lowest due to delayed return to work, driven by the pandemic, the coworking ecosystem has seen a significant upswing.
Coworking spaces are gaining popularity in Tier 2, 3 cities of India
Coworking spaces are gaining popularity in Tier 2, 3 cities of India
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Lavelesh Sharma is the co-founder of in Indore. The company, which helps direct-to-consumer brands with their warehousing requirements, was incorporated in January, and recently moved into an office. And Lavelesh says that they made a conscious decision to choose a coworking space to work out of. “Since it’s a managed office, most of the little things that you forget to care about are already sorted here and since it’s a shared economy model, there is somebody who is taking care of things like the internet, housekeeping, etc. All of these things in an unmanaged office take out bandwidth from you,” he says.

Over the past couple of years, coworking spaces in Tier 2 and 3 cities have seen a rise. With hybrid workplace models picking up pace, work from anywhere is a choice some employers are letting their employees make and more businesses and employees are opting for coworking spaces due to convenience and flexibility.

Another aspect of coworking spaces that have businesses gravitating towards them is scalability. “Let’s say if you’ve got a team of 10 right now, but you want to increase it to 20. In an unmanaged office, there are leases, rents, notice periods. In a managed office, you can take another cabin and there are lots of ways to incorporate more people,” says Lavelesh.

He also adds that in a coworking space, you get to interact with more businesses and there is a lot of learning and networking that happens. Lavelesh, who has 8-10 employees in his team, says that a co-working space uplifts the mood and morale of the team since everybody is working in their personal zones and this, in turn, leads to an increase in productivity as well. 

This is echoed by Varthika Singh, an IT employee working in Dehradun. She has been working in a coworking space since August and says it’s a fun environment to work in as there are no restrictions, unlike in a traditional office. “Being surrounded by other hard-working professionals, actually gets you motivated and boosts your energy to work in that environment,” she says.

“In an office, you have to stick to particular hours. But in a coworking space, I decide the time I want to sit and there are no fixed limits,” she adds. 

Varthika says that she plans to continue working from coworking spaces for a while longer as her company is flexible and has left it to her to decide when she wants to return to the office. 

Hub and spoke model

Coworking space providers are witnessing a surge in demand from Tier 2 and 3 cities as a growing number of organisations are exploring the 'hub and spoke’ model to enable employees to work from locations closer to their homes, says Sparsh Khandelwal, Founder and CEO of Stylework — a coworking space aggregator with a pan-India presence. 

The hub and spoke model is a business model where companies have a centralised hub or headquarters, but operate from multiple regional offices or coworking spaces, thereby allowing employees to strike a balance between home working and office working. 

“Letting employees work from their hometowns can create a larger impact in the long run as it would give a boost to the local economy for people living there and would lead to better infrastructure and opportunities even in the smaller cities,” he adds. 

The rise in people using coworking spaces has also been powered by technology that aids communication. “Technologies are taking over as our prime medium of communication. Video conferencing and digital connect technologies have disrupted the global market. Location is no longer a constraint which has opened up a supply of talent from Tier 2,3 cities leading to a coworking real estate spike,” says Deval Singh, Business Head- Telecom, IT&ITes, Media and Government, TeamLease Services, an HR and staffing solutions provider.

Co-location (the need to collaborate with better internet, devices, etc) and infrastructural requirements are broadly fuelling the rise of coworking spaces in the smaller cities, says Nikhil Sikri, CEO & Co-Founder of Zolostays, one of the largest co-living brands in India. 

“As far as we can understand, around 10 to 15% of an organisation will become permanent WFH and some firms like TCS have also tried to go up to 25%. For that 15% on average, these kinds of setups will be needed because even though they are permanent WFH, they need a better infrastructure on and off depending on the project, the kind of work and they will still need collaboration where they might want 2-3 teams to get together at one point couple of days of the week,” he adds. 

Rise in coworking spaces

While demand for traditional office spaces is perhaps at the lowest due to delayed return to work driven by the pandemic, the coworking ecosystem has seen a significant upswing. “Office rental costs in metros have been rising, and most businesses affected due to the pandemic have hived off office spaces and are strategising better workplace models that are cost-effective to their organisations, suitable to employees’ work-life balance, and at the same time near their homes,” says Rupal Sinha, CEO IFMS, Quess Corp, a leading business services provider.

Access to better technology at affordable prices and reverse migration (people returning to their hometowns since the pandemic) has added to the demand for coworking spaces as well. “Many employees returning to small towns may still want an office space to work remotely, due to either the nature of their work or space constraints at home,” she adds.

According to a recent report ‘The Future is Flex’, property advisory CBRE South Asia has estimated India’s flexible office spaces to expand by 10-15% year-on-year during the next three years. CBRE noted that cautious expansion by operators in Tier 1 and 2 cities in the medium run is expected to drive the flexible space industry.  

India is the third-largest startup hub and the second-largest freelance workforce in the world, and there is a huge potential demand for coworking spaces in the country, says Rupal. “Besides, companies are choosing coworking spaces today as an alternative to working from home, especially for employees who have networking, client interfaced jobs that require a constant virtual meeting with customers. This trend may also continue in the post-pandemic environment,” she adds. 

IndiQube sees immense potential for coworking spaces in markets like Ahmedabad, Coimbatore, Jaipur, Lucknow, and Indore. “In the next 12-18 months, we plan to add 5,000-10,000 seats in 10-15 Tier 2 cities. This expansion will be primarily driven through partnerships and acquisitions of smaller operators,” says Meghna, the co-founder of coworking solutions provider IndiQube.

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