Market development forecast for coworking centers
The relevance of research
Coworking spaces are a segment of the office market that has begun to develop rapidly in the last decade. Experts attribute the growing popularity of this format to the global “boom” of startups and the formation of a sharing economy. Demand for flexible workspaces is growing and fueling new co-working spaces around the world
Purpose of the study
Analysis of the state of the market of coworking centers, assessment of the market size, analysis of competitors, as well as identification of factors affecting the market of coworking centers
Content
Chapter 1. Economic characteristics of the market of coworking centers
1.1. Market size
1.2. Market Growth Rate
1.3. Market trends
1.4. The main problems of the industry
1.5. Industry life cycle stage
1.6. Estimation of the number of buyers and their financial capabilities
1.7. Estimated consumption per capita
1.8. The pace of technological change and product innovation
1.9. Sales channels
1.10. Compact location of industry companies in certain regions
Chapter 2. General economic environment
2.1. Economic components
2.2. Social Components
2.3. Technological components
2.4. Political Components
2.5. STEP-analysis of the market
Chapter 3. Assessment of the degree of competition
3.1. Scale of competition (local, regional, national, global)
3.2. Number of competitors and relative market shares of the largest competitors
3.3. Competition from substitute products
Chapter 4 Industry Forecasts
4.1. Analysis of the impact of recent crises on the industry (the global crisis of 2008 and the currency crisis in India in 2014)
4.2. Analysis of the impact on the state aid industry at the current date
4.3. Studying scenarios for the development of the industry in terms of quarantine in connection with covid-2019
4.3.1. Single Quarantine Scenario (according to the Chinese release schedule)
4.3.2. Scenario of two quarantines
4.4. Analysis of existing cases of business restructuring in the industry
Chapter 5 Forecasting Methodology
5.1. Methods for forecasting key industry indicators
5.2. Sources of information for forecasting
5.3. Timing of forecasting
Research excerpt
Part 1. Economic characteristics of the market of coworking centers
1.1. Market size
Coworking spaces are a segment of the office market that has begun to develop rapidly in the last decade. Experts attribute the growing popularity of this format to the consequences of the global financial crisis of 2008, as well as the global ""boom"" of start-ups and the formation of a sharing economy.
Diagram 1. Volume of the global coworking market, units
The structure of the new coworking spaces consists of:
New Projects: Indicates completely new ventures.
Extensions: Indicates that companies are opening their second location or more.
Chains: Denotes large coworking chains and franchises.
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Industry experts note that today the share of coworking in the total supply of office space in India is quite insignificant - less than ..%. This means that co-working spaces have huge potential.
1.2. Market Growth Rate
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The main drivers of market growth are the growing need of large corporations for greater flexibility, the growing number of start-ups in the face of limited office space, as well as the growth in the number of self-employed workers.
The development of coworking spaces is one of the key trends in the office real estate segment. If earlier classic offices were in demand, now tenants have experienced all the advantages of coworking spaces, including their technical equipment and administrative services.
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1.3. Market trends
Based on the growth rate of various coworking spaces over the past few years in the city, we can conclude that the most popular in India in the near future will be:
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To date, the following areas for the development of coworking in India are relevant and actively developed:
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Moreover, from the usual reality of business centers, co-working spaces are actively moving to non-standard sites: they become tenants of shopping centers, come to hotels, universities, parks, and even stylobates of residential complexes.
Anti-crisis measures for flexible offices are not limited to space hygiene.
During the pandemic, co-working spaces have adapted their rates as follows:
Introduced soft cancellation policy.
Gave discounts to regular customers and prepared special offers for new customers.
Added rates for distance learning students.
They allowed to freeze the subscription and transfer unused rental days to subsequent months.
They offered to rent conference rooms for one person for virtual meetings.
Conducted virtual events and online seminars for residents.
Agreed on partnership programs with local businesses.
We focused on the format of an individual office.
1.4. The main problems of the industry
In India, the coworking market is relatively undeveloped. You should also take into account the difference in approaches to doing business in India and Western countries. The level of confidence in remote work in India is very low - a classic conservative employer prefers that all his employees are in close proximity. can only be assessed later.
In addition, almost all of India's early co-working spaces went bankrupt as it turned out that freelancers need more than just a workplace to be successful. It required the creation of a community of people aimed at closer cooperation, as well as the comfort of the office, a creative approach to its arrangement, and a special atmosphere.
The obvious problem with most coworking spaces today is the lack of a clear concept and focus on a specialized audience. The standard collaborative space is a room from 150 to 2,5 thousand square meters. m, with a good repair, modern furniture, lighting, wi-fi, a cooler and a coffee machine. For example, it is difficult for an IT development team to work next to sales managers - the former need silence, while the latter are constantly talking on the phone. Or a freelance copywriter can't focus when next door to a burgeoning event agency. As a result, coworking becomes inconvenient and the tenant has to change location.
Lack of specialization is really the problem with today's coworking spaces. Their organizers cannot predict the flow of customers, because they have no idea who will come to them tomorrow or leave them, so zoning into the conventionally noisy and quiet parts of the coworking is difficult.
1.5. Industry life cycle stage
In terms of life cycle stage, the Indian coworking market is in its infancy and growth.
This is evidenced by:
growth in the volume of consumption of services in monetary terms per capita;
growth of the market volume in terms of money in the last decade;
shaping the culture and experience of applying for coworking services;
market growth potential remains high.
In the growth stage, competition intensifies and the number of players increases greatly, as the growing market segment attracts new players looking to make quick profits. At the same time, competitors enter the market with improved, more competitive products. Strong major players are the first to enter the market, able to switch current consumers to themselves and capture the formed market share due to high investment opportunities.
Pricing is becoming one of the ways to compete. As a result of increased competition, cheaper analogue products or more affordable variations of services appear - all this leads to lower prices, to large discounts and price promotions.
The main task of marketing at this stage is its maximum extension, which is achieved by using all sources of growth and building entry barriers for new players.
1.6. Estimation of the number of buyers and their financial capabilities
The dynamics of consumption of coworking services is determined by:
trends in the indicator of real incomes of the population (see section 2.2);
business development trends.
It should be noted that companies are increasingly using coworking space to test alternative employment models, which stimulates demand for space.
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1.7. Estimated consumption per capita
Based on the specifics of the studied market, the coworking service is the most in demand in large cities. In regions with low population density, the market does not yet have the potential to develop.
Given the above, the overall consumption of coworking services per capita is quite low.
In 2013-2014 the per capita consumption rate was below 1 rupee per person, which is associated with the birth of the Indian market. Starting from 2014, spending statistics show steady growth. At the end of 2019, the average amount spent by a city resident on coworking was … rupees. Such low figures for per capita consumption reflect the low saturation of the market and indicate a high potential for its development.
1.8. The pace of technological change and product innovation
The pace of technological change in the coworking market is moderate. It is expressed in the improvement of technologies for the provision of services, the development of specialized software.
The pace of technological change and the creation of product innovations in the Indian coworking industry largely depends on the technological level, employment of the population, the number of educated employees, knowledge change (accumulation of R&D results) and government policy that sets the mode of technological development through relevant institutions. At the same time, it should be noted that, in general, for the industry under study, the rate of development to the least extent depends on the amount of expenses for creating the coworking infrastructure.
Coworking is an open structure, coworking participants are all kinds of independent companies and individuals who can change their workplace from day to day, from one geographical location to another. There are no barriers to entry and exit from the coworking space. This allows us to talk about such a concept as open innovation. Coworking is not funded by idea-consuming enterprises, is not affected by their management systems, and is legally independent.
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1.9. Sales channels
Diagram 7. Channels for the implementation of coworking services, 2019, %
1.10. Compact location of industry companies in certain regions
As of June 2020, the largest concentration of existing coworking centers is in the Central Federal District, which is directly related to the development of business units, which are the main target audience of the market in question.
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Part 2. General economic environment
2.1. Economic components
GDP is a macroeconomic indicator that reflects the market value of all final goods and services (that is, intended for direct consumption) produced per year in all sectors of the economy on the territory of the state for consumption, export and accumulation, regardless of the nationality of the factors of production used. It is the main, most complete official indicator of public welfare. The absolute and relative values of GDP give an idea of the general material well-being of the nation and the dynamics of its growth / decrease, since the higher the level of production, the higher the welfare of the country.
Chart 10 shows India's GDP growth rate from 2011 to 2019 at comparable prices (at 2016 prices).
Diagram 10. Dynamics of India's GDP, 2011-2019, Q1 2020, % to the previous year, trillion Rs.
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The industrial production index shows the total volume of all industrial production, utilities, etc. in terms of money.
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Table 4. Industrial production index by state of India (in % of the previous year), 2015 - 2019
Rate of inflation.
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The development of office real estate construction in India. Because co-working centers are being opened both on existing office space and on newly commissioned ones, the development of the construction of office buildings in India has a significant impact on the analyzed market.
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Development of transport infrastructure. An essential factor when choosing a coworking space for end users is the transport accessibility of the chosen office, especially taking into account the specifics of the difficulty of traffic during peak hours in large cities.
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2.2. Social Components
During 2012-2018 India's population is on the rise. The increase in the population in 2015 was not only due to migration and natural increase, but also due to the formation of two new states of the Federation - the Republic of Crimea and the city of Sevastopol.
According to the forecast for the period up to 2024, the population will increase only if the high version of the forecast is followed, however, in light of the developing economic crisis and the coronavirus pandemic, this version of the forecast is unlikely to materialize.
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Increasing level of urbanization.
Urbanization in India has the following features:
intensification, concentration, versatility of urban activities in agglomerations and cities;
the urban way of life is spreading not only in large centers, but also beyond them;
formation of large-scale urban agglomerations;
gradual transition from single centers to strip, nodal, linear agglomerations;
an increase in the radius of settlement outside urbanized areas that are associated with recreation areas, industrial areas.
The migration influx to large cities leads to an increase in the concentration of potential consumers of coworking centers in them. Additionally, it should be noted that the level of urbanization contributes to the development of the population's need for non-residential facilities and stimulates this area of construction.
Indian mentality. According to the analytical study, the specifics of the Indian mentality has an impact on the analyzed market.
In small towns and settlements, the service of short-term office rental for a more efficient organization of the work process is not widely used, because. it is believed that working even in extremely uncomfortable conditions is more correct than spending personal funds on renting a third-party production facility.
Influence of fashion trends. Currently, a significant number of large coworking centers position their services not only as an opportunity to work in comfortable conditions, but also as an opportunity to communicate with a large number of creative personalities. Significant emphasis is placed on the fact that significant media people actively use the services of coworking. Additionally, emphasis is placed on the reasonableness of using this service for the purpose of personal self-development.
General trends in macroeconomic indicators can also be traced in such a value as real incomes of the population, which determine the level of effective demand.
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2.3. Technological components
Implementation of scientific developments and technological equipment. In large cities, potential clients, when choosing a specific coworking space, pay significant attention to the range of additional services provided, which include the technological equipment of the space offered for rent.
According to the analytical study, an essential factor is the ability to use modern office equipment and sophisticated technological support, including projectors and video equipment (this is especially true for renting meeting rooms for successful meetings).
Nowadays, even in the largest cities, most coworking centers use outdated office equipment. The full-fledged equipment of offices with modern technology has been implemented on an extremely small scale.
Statistically, quite often there are cases when the equipment declared in the rental offer does not work satisfactorily or requires prompt repair.
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Large companies in the analyzed segment try to advertise their services on the site as fully as possible, however, small companies often neglect this direction.
Process automation and software implementation:
Implementation of CRM and MRM (member relationship management) - an automated system that allows you to manage all the operational processes of the smart space.
Marketplace is an online platform where the buyer can compare and purchase services from different spaces and operators of coworking networks. This model came from well-known real estate marketplaces — booking.com or airbnb.com. There are now about five such platforms for renting workspaces in the world. In India, nothing like this happened until April 2017.
The SPACEPASS mobile application, which, in addition to booking functions, contains community tools and a guide to the space in which the resident works.
The introduction of modern software products allows you to reduce the load on coworking employees and automate the service as much as possible. The positive influence of the factor.
2.4. Political Components
Governmental support. The Government of India has not formally declared specialized support for enterprises engaged in the provision of office space for short-term lease. Companies have the right to receive additional support only within the framework of the general program for the development of the country's economy. Getting subsidies in the analyzed market segment is a rather complicated and lengthy process. As the analysis showed, in most cases, only companies affiliated with state structures succeed in this.
Given the cost of high-quality equipment for equipping office space for this type of lease, as well as the cost of building new centers, this situation has a negative impact on the market.
Foreign policy relations determine the vector of export development, the geography of raw material supplies, as well as the economic situation in the country as a whole. Prospects for development will largely be determined by the results of international negotiations, the establishment of new foreign trade relations, and the implementation of the import substitution strategy.
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2.5. STEP-analysis of the market
Let's consider the main factors influencing the market and, accordingly, demand.
In general, the impact of macro factors on the coworking market can currently be assessed as a negative strong force. A group of economic and political factors has a negative impact. Most of the social and technological factors are also negatively affected.
Factors such as process automation and software implementation, urbanization of the population and fashion trends have a positive impact.
Table 6. STEP analysis of factors influencing the coworking market
Part 3. Assessment of the degree of competition
3.1. Scale of competition (local, regional, national, global)
On a global scale, the share of coworking spaces in the office market is still small – no more than …%, but this does not make this segment less attractive for investment.
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3.2. Number of competitors and relative market shares of the largest competitors
It should be noted that in 2019, network operators occupied … the coworking market in India in terms of occupied space.
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The calculation data of the Herfindahl-Hirschman Index in the coworking services industry (Index = 150,94) shows that this market belongs to low-concentration markets (market concentration is low). Mergers and acquisitions are allowed freely.
Estimating the total revenue of the market leaders is complicated by the fact that market operators provide data on revenue volumes for the company as a whole, without a breakdown by industry, as well as the region of presence.
Diagram 18. Dynamics of the total revenue of the largest operators of the market of coworking centers (TOP-5) in India, 2015-2019
3.3. Competition from substitute products
The main advantage of coworking spaces compared to traditional offices is their ""flexibility"".
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Not unimportant advantage is the fact that tenants do not need to make repairs, hire cleaners, or purchase furniture. The price includes a seating area, utility bills, tea and biscuits.
Among the advantages of co-working spaces over traditional offices, market participants also note non-standard design and convenient organization of the workspace, as well as the possibility of forming a single community.
Part 4. Industry Forecasts
4.1. Analysis of the impact of recent crises on the industry (the global crisis of 2008 and the currency crisis in India in 2014)
The period from 2014 to 2016 (some experts note the period from 2014 to 2015) became a turning point in the development of the coworking segment in the Indian market from the moment they appeared to the present. The economic crisis in India has contributed to a sharp increase in demand for co-working spaces, both from the growing number of individual entrepreneurs and start-ups, and from corporations that were forced to look for ways to optimize costs.
It was then that the number of coworking spaces increased by more than half, and coworking itself proved to be a potential full-fledged replacement for the office for both some professionals and some companies, receiving a powerful impetus for growth and development in subsequent years.
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4.2. Analysis of the impact on the state aid industry at the current date
At the end of March 2020, the government identified 22 sectors that will be the first to receive state support in the context of the economic crisis and the coronavirus pandemic: the government commission on improving the sustainability of the Indian economy, chaired by First Deputy Prime Minister Andrey Belousov, approved the list of sectors of the economy most affected by the deteriorating situation in connection with the spread of a new coronavirus infection, to provide priority targeted support.
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Based on the results of consultations with the business community, the Ministry of Economic Development of India submitted the following sectors for approval to the Commission: air transportation, airport activities, trucking; culture, organization of leisure and entertainment; physical culture and health-improving activities and sports; activities of travel agencies and other organizations in the field of tourism; hotel business; public catering, organizations of additional education and non-state educational institutions; organizing conferences and exhibitions; activities for the provision of personal services to the population (repair, laundry, dry cleaning, hairdressing and beauty salon services). The list of industries was approved by the Government of India Decree No. 3 dated April 2020, 434.
Companies providing coworking services are not included in the list of so-called affected organizations that suffered financial and material losses from the introduction of the self-isolation regime. They can only use the general support measures for SME staff and other organizations that apply to all companies in India, which are presented in table 9.
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4.3. Studying scenarios for the development of the industry in terms of quarantine in connection with covid-2019
About …% of residents of flexible offices and co-working spaces are representatives of companies most affected by the current crisis. Coworking spaces carry an important social burden, provide entrepreneurs with jobs, so their massive closure will automatically lead to the liquidation of entire layers of businesses.
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Based on the forecast indicators of the development of the Indian economy and based on the analysis of retrospective data, namely the impact of previous crises on the industry, GidMarket analysts made a forecast for the development of the market within one and two quarantines.
4.3.1. Single Quarantine Scenario (according to the Chinese release schedule)
Under the scenario of one quarantine, the analysts of the GidMarket company forecast the market growth by …% in 2020. Further, growth rates will slow down as the market becomes saturated. The average annual growth rate in the forecast period will be at the level of …%.
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4.3.2. Scenario of two quarantines
Consider the development of the market in the conditions of two quarantines.
Within the framework of two quarantines, GidMarket analysts also predict the growth of the coworking market in 2020, but the growth rate will be lower by ... p.p. than in the scenario with one quarantine ...
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4.4. Analysis of existing cases of business restructuring in the industry
The development of coworking and flexible spaces after the 2020 pandemic will require additional investment. Unlike ordinary offices, where the employer knows all his employees and can control them quite clearly, residents of coworking spaces can change every day, come from other regions and countries. Therefore, according to the General Director of the construction company ... in this case, great attention will be paid to engineering systems, primarily air purification, ultraviolet lamps for disinfection, automatic doors, bathrooms with an automatic flush button, automated sinks can be used. The number of square meters per person and the distance between tables will be clearly regulated. It is very likely that the residents of co-working spaces themselves will pay great attention to this.
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Thus, the format of district co-working spaces is in its infancy, but the interest of housing developers and the prerequisites for rapid growth are obvious. The Indian flexible office market follows global trends, but follows the same path with some delay.
Part 5. Forecasting methodology
5.1. Methods for forecasting key industry indicators
Modern statistical forecasting methods are used, taking into account the actual dynamics of the industry and the impact of the current and projected general economic situation in connection with the spread of the covid-19 virus.
In addition, when compiling the forecast, changes in real incomes of the population, trends in consumer preferences in a crisis, development forecasts and the degree of impact of other factors affecting the industry are taken into account.
5.2. Sources of information for forecasting
Industry volume over the past 7-8 years
Industry dynamics in 2008-2009, in 2013-2019*
Dynamics of macroeconomic indicators over the past 8-9 years
Current public assistance plans
Databases of the State Statistics Committee of India
Indian Revenue Service databases
India Customs databases
Open sources (websites, portals)
Issuer reporting
Company websites
Media Archives
Regional and federal media
Insider sources
Specialized analytical portals
* Until October 2020 financial indicators for the main market operators and industry coefficients for 2019 - GidMarket forecast based on the dynamics for 2015-2018, except for cases when the operator discloses data on the results of financial 2019 publicly.
5.3. Timing of forecasting
The forecast belongs to the medium-term category - 5 years (2020-2024)
Diagrams
Diagram 1. Volume of the global coworking market, units
Diagram 2. Structure of new projects, %
Diagram 3. Dynamics of the volume of the coworking market in value terms in India, 2013 - 2019, million Rs.
Diagram 4. Dynamics of the volume of the coworking market in India, in physical terms, 2013 - 2019, thousand sq.m.
Figure 5. Life cycle stage of the coworking market
Diagram 6. Consumption of legal and attorney services per capita, 2013-2019, Rs./person
Diagram 7. Channels for the implementation of coworking services, 2019, %
Diagram 8. Market structure of coworking centers by Union Territories, %, 2020
Diagram 9. Cities with more than 10 co-working spaces, June 2020, units
Diagram 10. Dynamics of India's GDP, 2011-2019, Q1 2020, % to the previous year, trillion Rs.
Chart 11. Monthly dynamics of the US dollar against the rupee, 2015-2020 (Jan-May), Rs. for 1 US dollar
Chart 12. Dynamics of the inflation rate in India, 2015-2020 (5 months), %
Diagram 13. Dynamics of the population of India, as of January 1, 2012-2020, million people, thousand people
Diagram 14. Population forecast in India for the period 2021-2024, million people
Chart 15. Dynamics of real incomes of the population of India, 2012-2019
Chart 16. Internet penetration dynamics in India, 2008-2019, %
Diagram 17. Shares of the largest competitors in the coworking market in 2020
Diagram 18. Dynamics of the total revenue of the largest operators of the market of coworking centers (TOP-5) in India, 2015-2019
Diagram 19. Forecast of the coworking market size in 2020 - 2024 – under the scenario of one quarantine, mln Rs., %
Diagram 20. Forecast of the coworking market size in 2020 - 2024 – under the scenario of two quarantines, million Rs., %
Tables
Table 1. Largest rental transactions in coworking spaces, 2019
Table 2. Structure of the Indian coworking market by state, June 2020, units, %
Table 3. Expert forecasts for the decline in real GDP in India in 2020, %
Table 4. Industrial production index by state of India (in % of the previous year), 2015 - 2019
Table 5. Population density in the largest regions of India, 2019
Table 6. STEP analysis of factors influencing the coworking market
Table 7. Main companies participating in the market of coworking centers in 2020
Table 8. Assessment of the impact of recent crises on the industry
Table 9. Analysis of the impact on the industry of the state aid proposed to date
Table 10. Forecast indicators for the basic and pessimistic scenarios for the development of the crisis, %
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