Historically, opening a restaurant is one of the most tried and tested business of all times, it also has one of the highest failure rate (over 60%). To a certain extent it still is, by looking at the rate at which F&B outlets are beings leased in Delhi’s expensive retail hot spots for every possible theme out there, the latest I heard was as wired as a restaurant with “hospital theme”. How cool will it be to have your dinner around an operation theater sort of ambiance? Only now the restaurant business is getting a stiff competition from another business stream called co working.

Co working is the new buzz word in the young startup community for folks who are looking for cost effective office spaces in Delhi with no hassles of overheads like maintenance, electricity, internet, etc.  The word “rent” suddenly has a more “cool” name in “membership fee”.  Co working spaces at the core are collaborative hubs where entrepreneurs from similar industry share resources and bounce off ideas to mutually grow. Owners of the co working space usually also have a stake in budding businesses so the entrepreneur can concentrate more on immediate business needs rather than worrying about steep monthly rental cycle. That’s the traditional model, fast forward to this date, these co working hubs are merely reduced to business centers/executive suites like Regus, Avanta etc that merely offer a desk or cabin with plug n play set up. So calling a table at a loss making bar, or a spare desk at a failed IT business a co working space is perhaps not quite right.  At best, these are shared work stations/spaces.

While the jury is still out on whether the so called co working spaces actually increase productivity, I have serious doubts whether these co working hubs are able to even save cost for people who hire these space, unless they are running in losses. First, the sheer number of these spaces mushrooming all over Delhi and NCR locations is overwhelming, second, the most popular business model of the so called co working spaces is to make a revenue sharing + minimum monthly rent guaranty arrangement with the landlord, do fits outs (usually open plan to maximize number of desks), make arrangement for additional services like telephony, internet, mail handling, tea/coffee, photo copying/printing, conferencing facilities like video calling etc and arrive at a certain membership fee to be charged to someone who decides to hire a desk. All of this investment needs to be recovered from membership fee/rental income keeping in mind that people who sought such spaces are looking at fairly conservative rentals so the whole business model really is about high volume and low margins. It can only become viable over a long term period given that one is able to scale the number of people to lease the space consistently and also leverage from peripheral services like, providing food and beverages, events, HR/payroll support, seed/VC interactions, legal support etc to be able to negotiate a better deal with landlord.

There are two ways of achieving this, either you have really deep pockets to burn money on online syndication, marketing campaigns or you take the organic route and create a niche for your working space and let word of mouth do the PR work for you. Space being offered today at different co working centers are merely work stations, there is nothing new in it, we all have the same at our offices, so they would need to innovate and see how nature of work is changing with automation and artificial intelligence and offer customized solutions tailor made solutions to various different industries accordingly. Once co working players are able to achieve this, I guess, they will have a great time ahead. Now these solutions could be expensive, however, they should bring value for the tenant/member, right now whats happening is neither the tenant is getting any value nor the operator has big margins. 

I am not a naysayer for co working spaces, in fact I firmly believe it’s the natural evolution and extension of our traditional office space. However, ultimately, its all about how productive the place is and is it mutually beneficial for both members and owners. Global giants like WEWORK are getting lot good press and valuation, they also have huge expansion plans for India too, it’s a great opportunity for Indian players in the game to create a niche for themselves and be ready for consolidation.  Unfortunately, not many new operators who are jumping in the game thinking lets ride this fad and make some quick buck, don’t quite understand the underlying thought behind the concept of space being offered as service for increased productivity neither do they have the kind of networking skills and mindset to create economies of scale required to be able to make this a sustainable business. What if a small recession hits? Most solely rely on syndication and other online tools like google adwords, email marketing etc for new members/tenants. Operators would to have look beyond the initial razzmatazz of trendy furniture, loud wall posters, coffee, glitzy amenities etc to attract and retain members if they have to make it a profitable and meaning full business venture.