Tier 2 cities could drive Coworking:

Among the various types of shared office space concepts, coworking spaces have earned the highest popularity. Innovations by creating such workspaces have made a huge difference in the overall work environment of a workspace. Coworking operators had always ensured that it is not just individuals working separately under a roof but have created the phenomenon of maintaining a relationship with fellow coworkers. Meanwhile, in India coworking might still be in its initial stages of development as a profound form of office space in tier 2 cities. The coworking concept has seen its tremendous growth from the past several years and it is essentially the private sector’s response to meet today’s activity-based work requirements. The concept of coworking spaces is especially popular among boutique firms and startups today, for whom coworking spaces offer flexibility without the need to tie up lease obligation.

In India’s top cities of Delhi NCR, Pune, and Bangalore, coworking spaces are likely to lead to cost savings in the range of 20-25% when compared with leasing a traditional office space. The key drivers of coworking spaces in India are cost, infrastructure, and networking opportunities. While freelancers, startups, small-medium sized enterprises in India are primarily focused on the cost factor and infrastructure.

A growing number of coworking spaces in tier 2 cities like Indore, Ahmedabad, Rajkot, Udaipur, Kota, Surat, Pune, and other cities have boosted the startup ecosystem. Startups who seek an ecosystem are able to create communities within coworking spaces. Boost of coworking spaces within the tier 2 cities are because of the rise of startup aspiration within the people. According to the research it has been stated that coworking spaces are present in more than 40 Indian cities including small cities. There are around 250 coworking spaces in tier 2 and tier 3 cities.

The reasons why all the tier 2 cities are expected to see a similar demand:

Emerging entrepreneurs in Tier-2 and Tier-3 cities:

Smaller cities have technologically trained people who are experts in creating and adopting their own startup. For these skilled professionals to lease a reliable workspace with proper infrastructure can take a lot of time but coworking spaces will make it easier, shortens the gap and will allow such professionals to start their work immediately.

Government promotions:

Since the smart city mission was launched in 2015 to solve the problems in urban areas, this is also an opportunity that increases the opportunity in these cities that could see a lot of development and even the advent of more coworking spaces. The “Make in India” movement of the government is encouraging tier 2 and tier 3 cities to build, and this will also lead people relocating to tier 2 cities and that would encourage the necessity of coworking spaces.

Choking Cities:

A workspace must be easily accessible to employees and must be comfortably located for potential clients. Tier 1 cities face a lot of problems like parking problems, associated costs, and saturation. If coworking spaces would expand to tier 2 and tier 3 cities which have more affordable spaces to offer. It would offer a better quality of life and lower property taxes and rates. All these make tier 2 and tier 3 cities more appropriate for expansion.

Quality workspaces:

Coworking spaces offer high-quality offices that are 24*7 accessible at a reasonable cost. It is estimated that coworking spaces can save up to 30% compared to traditional self-managed offices. This will make tier 2 and tier 3 cities an attractive option.

Short term projects:

Indian as well as international entities who want to expand their organizations in tier 2 and tier 3 cities would sometimes need workspaces for a short period of time. This would increase the demand for coworking spaces in such locations. All such companies would prefer coworking spaces because of the lower operational costs and a flexible work environment which will have a scope of work and include prime land availability at a lower cost.

Demands of the modern workforce:

With an average age of 29, India is expected to become the country with the youngest workforce by 2020. Nevertheless, the economy is unable to generate jobs that can absorb the prospective employee base. As a consequence, the number of freelancers is increasing. These resources, apart from high remuneration, are also watching for some additional perks such as adjustable working hours, comfortable work locations, and the availability of high-quality utility services such as the internet, etc. Coworking spaces are an exemplary combination of these various necessities, thus becoming a popular option with businesses and professionals alike. From bootstrapped startups to established corporate houses, every organization is seeming to examine the opportunities in Tier-II cities in a coworking way.

Key Factors why Tier-II cities prefer coworking spaces:

• Shortage of funds to leverage business in the early stage
• Finding technology partners
• Working with like-minded and highly enthusiastic people
• Building network

Approximate no. of coworking spaces in few tier 2 cities:

One of the most important reasons for coworking spaces to be introduced in Tier-II cities has been the increasing numbers of home-grown startups and entrepreneurs from these localities. Initially, talented individuals had relocated towards tier 1 cities as only these places could present their chances to grow. But, with the evolution of technology, everything can be done through the internet. Recently, Jaipur got five coworking spaces. A high number of coworking brands are also developing in other cities such as Indore, Rajkot, Udaipur, Bhubaneswar, etc. Even Kota, a tiny city in Rajasthan recognized for its blooming coaching classes industry has its own coworking space. A large number of bright young minds in these areas would have definitely played an important role in such a decision.

Facts about coworking spaces in India:

• 84% feel more engaged and motivated since joining their coworking community.

• 82% cited an increase in the size of their business network.

• 83% reported a sense of isolation decreasing.

• 14 Million people are expected to work out of coworking spaces across India by the end of 2020.

• The coworking industry is expected to reach a valuation of $2.2 billion by 2022.

• Tier 2 cities are expected to grow to 8.5 million seats by 2020.

• Over 14 million people are expected to work out of coworking centers by 2021.

The potential market in India:

The coworking industry is still in its nascent stage in the country, with various players rising in this market. This is considered in the fact that over 90% of India’s 300 shared workplace operators began their first coworking space in 2019 (Source: Coworkyard). With 3–4 startups arising every day over the past few years in India, the country has become the third-largest startup hub in the world, with a total employee base of a million. The numbers are expected to reach more than double by the end of 2020. Since, India has a huge freelancer workforce (second in the world), in excess of 15 million professionals, and developing comparatively fast. These two factors together present a potential demand for more than 3.5–4 million seats.

Thus, the future of coworking in Tier 2 cities in India will shape up in the future based on the number of employment opportunities generated in those cities.  To keep the younger workforce motivated in the work environment might be a crucial factor in the coming years. Many large companies, who either own office spaces or are still operating through conventional leased-out buildings are also approaching coworking space operators in order to accommodate the flexibility of location to provide a creative workplace to their employees.