Is Serviced Office Business a Bubble or a Reality?

November 12, 2018

With the exponential growth in entrepreneurship and startup businesses, co-working spaces and serviced offices have become synonymous to the ‘startup lifestyle’. The last 5 years, in particular, have seen immense growth. But there’s a lot more brewing behind the scenes when it comes to the growth and sustainability of the industry.

In the UK capital of London, a New York-based flexible workspace provider occupies more real estate than any other entity, except for the UK government. 27% of the working spaces in Singapore are co-working spaces, according to data by global real estate firm Cushman and Wakefield. In India, too, the demand for co-working spaces has been growing. The number of companies operating in the space is expected to double in coming years, and a lot of future growth would come from both tier-1 and tier-2 cities.

What explains this remarkable growth in serviced offices? And what’s the future of this growth? Let’s understand why this business model is here to stay.

Serviced offices aren’t just for startups

They are also for mid-sized teams, or self-employed individuals, freelancers, SMEs and Enterprises. In many cases, they’re also for larger organisations and big corporates that set up new offices in new locations, or start a new line of business that operates more flexibly. Businesses are fast recognising the flexibility of customisable workspaces, the benefits of leaner operation models and freedom from an investment lock-in period. According to some estimates, companies can save between 15-20% of each year just by switching to a co-working space. Other studies point towards savings of up to 30%.

The focus on economic and environmental sustainability is a win-win

With the rise of the sharing economy, there are many additional benefits of the co-working industry in addition to the obvious economic advantages. With more efficient allocation of everything from real estate to air conditioning and lighting, serviced and shared offices are more environmentally friendly as well. Increasingly, that kind of sustainability is being recognised on the global stage as well, with clients and customers both appreciating businesses with a smaller carbon footprint.

The co-working sector is seeing enormous growth in India

This industry is seeing a remarkably steep growth curve, with an annual growth of 50% in recent years. In fact, according to a report by the global real estate firm CBRE, the growth of customisable co-working spaces is even larger than that for regular co-working spaces. In India alone, co-working spaces currently occupy 13.5 million square feet, according to CBRE. Co-working spaces in Mumbai are seeing 85% occupancy, while the current market size of 1.25 billion in Mumbai is expected to double by 2020.  

Serviced office businesses recognize the needs of workers and employees

Despite the rise in stress-induced anxiety and the global epidemic of loneliness, more and more serviced office operators like Skootr are incorporating physical, mental and social wellness into their design plans — whether it be with ergonomic furniture, high-tech napping pods or relaxation zones.

All in all, the serviced office industry in India has bright prospects. Despite the scepticism that some are voicing about this, their doubts are unfounded and the numbers tell a different story.

The very fact that there are concerns about this industry as a potential bubble is indicative of its growth and a fundamental shift in how we work. The key difference we need to recognise here is that the rise of co-working and serviced office spaces is not driven by developers or real estate. It’s a demand-led industry, responding to the changing ways of work and an increasing appreciation for more collaborative and productive workspaces.

And especially if you’re in India, the co-working model is going to continue to grow and evolve with changing consumer needs. It is very much a reality — one that’s here to stay.

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