Effect of Co-working Spaces in Mumbai on Commercial Real Estate

The COVID-19 pandemic disrupted life as we know it in several different ways. With social distancing and protective measures coming into play, online schools and remote working became more the norm than the exception. The real estate sector faced a major setback, but now with things returning to normal, we are witnessing the rise of another trend – that of co-working spaces.

Hybrid offices and incubation spaces are places that are privately owned but offer an office environment and all the associated infrastructure for rent. These can be booked by individuals or teams for a few hours to a few weeks. The greatest advantage of co-working spaces for professionals, entrepreneurs, and working individuals is that they offer all the advantages of office space at a convenient location. So, no more long work commutes or worrying about utilities and infrastructure at home.

Win-Win With Co-Working Spaces

Recent data published by a leading real estate consultant suggests that in the year 2022, the top seven major cities of India saw a rise in the share of co-working spaces by nearly 20 percent. The Mumbai Metropolitan Region (MMR) is at the top of the list of these cities. This means that not only are individuals seeking out co-working spaces, but corporations and major business houses are also looking at leasing these setups in strategic locations to facilitate their employees.

It is important to remember here that corporations save on rent, maintenance, and overheads when they utilise the services of co-working spaces. This plug-and-play model has eliminated the need for office equipment, cafeteria services, layout management, associated costs, etc. Additionally, unlike regular leases, co-working spaces have no lock-in period. It is indeed a win-win proposition for both the employee and the organisation. What we shall now see is how the rise of co-working spaces in Mumbai has impacted commercial real estate and property owners.

Commercial Real Estate in Mumbai

The size of India's commercial real estate market is estimated to be about USD 20.7 billion. Studies suggest that this is likely to grow at a CAGR of over 21 percent by 2028. The capitalisation rate of commercial properties in cities like Mumbai is pegged at 8.25. This means that the net operating income of commercial spaces remains considerably high compared to the market value of these office spaces. This is another argument that goes in favour of the rise of co-working spaces in cities like Mumbai. With the resurgence of the economy after the shadow cast by the pandemic, there has been a renewed interest in buying commercial spaces such as showrooms, warehouses, factories, and restaurant spaces. In the case of office spaces, though, experts believe there is likely to be a great deal of investment from people and entities looking to set up co-working spaces in Mumbai.

Mumbai – The City of Enterprise

The changing dynamics of economic activity make Mumbai a very interesting and attractive space. Widespread infrastructural development and the rise of commercial hubs in the suburbs are propelling this growth. With such a rise in commercial activity, a boost in demand for commercial real estate is natural. However, experts believe that even though the pandemic may be a thing of the past, the long commutes in this ever-expanding city pose a challenge that can only be resolved by the rise of remote working and co-working spaces in Mumbai. And Mumbai real estate investors are keen to comply.