Generate Rental Income by Investing in Coworking Space — New Way of Commercial Property Investment

Naresh Arora
5 min readApr 21, 2021
Generate Rental Income by Investing in Coworking Space — Commercial Property Investment

What is a coworking space?
A space where people from different companies or individuals gather to work, where they share everything except their dedicated workspace is called a coworking space. The use of common infrastructure such as equipment, utilities, custodial services, refreshments etc., results in cost savings for the users as well as companies. The concept of coworking spaces was originally brought about by a man named Brad Neuberg in 2005 in San Francisco.

A coworking space is not just about sharing infrastructure, it is sharing of ideas and knowledge in a comfortable and convenient environment and at the same time getting work done.

Coworking spaces are often affordable work places for people who are looking to escape a home office or working from coffee shops. Freelancers, entrepreneurs, start-ups and small teams are the typical customer base for coworking spaces.

Why invest in coworking spaces?

The demand for coworking space
According to the Global Coworking Growth Study 2020, analysts expect that the amount of coworking spaces worldwide would hit nearly 20,000 by 2021, and about 40,000 by the end of 2024. In 2024, an estimated five million people will be operating from coworking spaces, a 158% rise from today. These forecasts are built not only on the recent growth of the coworking industry, but also on the growing number of companies around the world that use flexible working practices.

It is a cost-saving investment
Smaller companies can save over 25% while bigger corporations can save upto 15–25% by investing in coworking spaces. These spaces give access to a lot of amenities like ergonomic office desks and chairs, super-fast wifi, state-of-art telecommunications, and conferencing facilities, central AC, Administrative and IT Staff, etc., because the cost would be shared among the different entities.

Furthermore, coworking spaces are often located in major business districts and neighborhoods in the city. Such central locations provide a significant benefit to the company by increasing accessibility and visibility which would help in producing a large number of business leads and client referrals. For the investor, a better location will generate a better rental income from coworking spaces. As for the renter, if it is an individual or a smaller corporation or a start-up, then they may not be able to afford these facilities on their own.

Return on investment ( ROI )
The business of coworking is dependent majorly on start-ups along with freelancers and individuals. A study by the multinational professional studies network states that the number of start-ups in the country has gone up by approximately 43,000 in a time period of just ten years. Not just SMEs and start-ups but even the big corporations are shifting their base to coworking spaces. Experts have stated that the coworking industry is expected to value at $45-$50 billion by the year 2022. In 2019, there were more than 3 million coworkers, worldwide. Considering these facts, it is safe to say that the demand for coworking spaces is only going to increase in the coming future. Thus, with all these facts in mind, we can say that the early investors will be receiving a higher return on investment than those who invest at a later stage.

Growth of coworking space in commercial real estate
In India, there are about 850 coworking spaces, with nearly 13 million people anticipated to work from shared workspace by 2020. It is also expected that by the end of 2020, coworking spaces will account for upto 20% of total global workspace. Coworking spaces cover an area of 3.4 million square feet in India alone. With the launch of real estate investment trusts in India, the commercial real estate sector is expected to develop at a rapid pace, making them one of the most sought after investment opportunities in the country today. Reports suggest that, before the COVID-19 pandemic, the coworking spaces were the fast growing type of office space in the commercial real estate industry. While they currently make up only 5%, they are expected to make up 30% by 2030.

Rise of coworking in tier 2 and 3 cities
Tier 2 and 3 cities like Indore, Ahmedabad, Chandigarh, Jaipur are now seeing the demands that were seen in tier 1 cities like Mumbai, Delhi, Bangalore initially. Tier 2 and 3 cities are developing at quite a fast rate. The increasing lack of space in Tier 1 cities, and the rising costs have also led to the development of tier 2 and 3 cities as they offer more affordable spaces, a better quality of life and lower property taxes and rates. The ‘Make in India’ has encouraged these cities to build and grow. Under this campaign many start-ups and individual entrepreneurs have emerged in smaller tier 2 and 3 cities. With the growing number of coworking spaces in these cities, the start-up ecosystem has seen a boost, and the demand for such spaces is evergrowing. Start-ups who want to create an ecosystem, have been able to create small communities within these coworking spaces.

Top Location to invest in Co-working space in India

Top Location to invest in Co-working space in India. Mumbai, Pune, Ahmedabad, Gandhinagar,  Bangalore,  Delhi NCR, Chennai, Hyderabad

Conclusion

The coworking trend has picked up pace in our country. Many businesses have struggled due to the COVID-19 pandemic in 2020, but coworking has upped the trend and is expanding significantly according to market analysts and experts. Well, these are only some of the benefits of investing in a coworking space. But all the benefits suggest that if investing in a commercial property, then coworking spaces are the best investment at the moment. The trends suggest that they are still growing and expanding making this time the best to invest in coworking spaces.

--

--

Naresh Arora

A realtor on a mission to help others in the fields with my good and bad life experience. Providing the best piece of advice to make life more enjoyable.