COVID-19 Lockdown: Is This The Early Death Of Co-Working Era?


The concept of co-working took birth and gained momentum in India in 2014. With the rise in the number of startups and SMEs, this model gained immense popularity. The rents were lower; the premises were upscale, fancy and modern; the arrangements were flexible that well-suited for the new startups whose requirements for the work spaces vary almost every second month. 

Flexible workspaces with 11.2 million sqft garnered 18% share in total leasing in 2019, as per Colliers report. However, the coronavirus pandemic and sub sequential lockdown are threatening to wipe out this newbie segment in India.

Lockdown Affect

The COVID-19 outbreak and the lockdown have taught Indians a lot about the practice of work from home, a concept which was looked down upon otherwise, often deemed as unprofessional and lackadaisical. Additionally, the availability of co-working spaces over the past five years ensured the availability of flexible and hassle-free workspaces for startups and small firms.

The forced and immediate adaptation of work from home practice is now changing the perception of office space as an additional overhead cost. This overhead cost which was considered bare essential until now might be seen as an option or luxury for time to come. And this cost many will be not willing to invest in, at least for coming two-three quarters.

Pic Credit: WeWork

Small companies, which are mostly the occupiers of co-working spaces, are hit badly in this global slowdown. Even if they continue to profit somehow, they will be most likely to cut their overhead cost and might consider switching to work from home for the next six months or a year to come.

As a result, the co-working companies will find themselves at the receiving end. SpringHouse has reportedly already received discontinuation mails for 350 out of 3,500 seats and the number is expected to rise further.

“It would be difficult for us to absorb this situation if the lockdown extends for more than a month or two,” Mukul Pasricha, founder-Springhouse, told ET Realty.

Puneet Chandra, founder and joint managing director of Skootr, a Gurugram-based player, reportedly fears that over 50 per cent co-working companies, especially those who have one or two centers, may close down if the lockdown is extended.

The companies with corporates as the occupiers are relatively in a better position than players with startups and SMEs. However, in many places, co-working players with corporates as occupiers are also feeling the heat as even the corporate are now declining to pay rents.

Expansion plans of co-working companies are suspended as of now. Growth and revenue targets are put on hold.

Post-lockdown Trends

Lockdown has hit the economy really hard. Even if it continues for 15-20 days or for a month at the max, it’s effects will be seen until Q2 and Q3.

Once the lockdown is over, it will be a while that things will be back to normal. Small companies and start-ups will continue to work from home despite the lift on the lockdown to both prevent infection and cut the overhead cost.

Clearly, re-negotiations on rentals will emerge as an issue in the post-lockdown times.  Big corporates operating from co-working spaces have already started negotiating their contracts and are looking for more flexible terms.

Once the coronavirus threat is gone, occupancy of the flexible spaces will be a huge challenge. The players are expected to resort to making great offers such as waiving off deposits, coming up with novel schemes such as a generous one-month rent-free option, and so on.

Experts say that Virtual Office is a concept that will rise wherein many co-working players will be seen exploring into. It basically enables companies to access their traditional range of services remotely and hassle-free from home. Conveniences include, having a business address at the prime location, in-house receptionist, and video conferencing.

The flexibility of co-working space will ultimately become its blessing. The key is to survive next few months.

“The landlords play a very important role here and need to support the coworking spaces in this hard time. In the long run, the co-working sector will be among the few industries that will see a V-shape recovery after the COVID-19 threat is over,” says Rohit Gawali, co-founder, Officebing.


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