Why are investors focussing on co-working and co-living segments in India?

• The Indian Real Estate sector has seen major changes over the last thirty years. Today, it’s swiftly changing again, thanks to tech advancements. These are making both the commercial and residential markets easier for many investors to enter. 
• This change is also visible in the rising popularity of shared living and workspaces. These places offer top-notch office and living areas that you pay to use, attracting interest from both big and small investors.
• Co-working and co-living properties have surfaced as attractive investment prospects for investors aiming for high return yields while minimizing risk exposure.

The Rise of Co-Working Spaces

• Co-working spaces have revolutionized the real estate sector by addressing the evolving needs of contemporary workers and businesses. These mutual spaces are an alternative to standard office settings, with flexibility in lease durations, communal facilities, and a dynamic community vibe. 
• The co-working industry in India is experiencing significant growth, with a projected CAGR of 16% from 2021 to 2026.
• The increased adoption of a blended work model and the growth of gig-based employment have made these collaborative workspaces a favored option for freelancers, emerging companies, and established businesses.
• Co-working spaces make it easier and fairer for everyone — from individuals and startups to big companies — to use office spaces. They can choose just the seats they need, not a whole office, which makes growing or shrinking their space simple and budget-friendly. 
• As the office space and the amenities are shared by multiple occupiers, it allows significant cost reductions and convenience by leveraging shared infrastructure, including equipment, utilities, receptionist and custodial services, and, in certain instances, amenities like refreshments and parcel acceptance services.

Factors fuelling the Growth of Co-Working spaces

• Flexibility: The appeal of co-working spaces lies in their adaptable lease agreements, which cater to the dynamic workplace demands of tenants. Particularly attractive to start-ups and small entities, these spaces offer a solution to managing costs and adapting to fluctuating market conditions.
• Community: Co-working environments nurture a sense of community and collaboration, presenting networking prospects, platforms for idea exchange, and opportunities for collective brainstorming. This collective atmosphere strongly appeals to those seeking to engage with peers and thrive within a supportive ecosystem.
• Amenities: Co-working spaces have many facilities and services, such as high-speed internet, ballrooms, conference rooms, and assisting concierge services. These amenities add to the overall work setting, significantly impacting client satisfaction and loyalty.

As the appetite for adaptable work environments and socially-oriented housing increases, along with varied sources of income, reduced risks, and an emphasis on tech-powered management, these properties promise attractive profits and sustained development. Investors who utilise these tendencies and adopt forward-thinking strategies in real estate will be well-equipped to prosper in an expanding market.

The Emergence of Co-Living Concepts

• Alongside the popularity of co-working environments, the concept of co-living is also attracting attention as a novel approach to city life’s dilemmas. Co-living facilities provide a spectrum of shared housing alternatives, from well-appointed apartments to dormitory-style accommodations, complemented by shared spaces and facilities. 
• These arrangements are enticing to city residents who are seeking cost-effective living spaces, opportunities for social connection, and community integration.
• The emergence of co-living spaces has given service providers a unique opportunity to improve the living standards of students and young workers. 
• Co-living investments produce higher returns than traditional residential ones and offer the associated tax benefits and capital appreciation for a smaller initial outlay.
• The co-living market in India is expected to double by 2024, reaching 450,000 units, driven by factors such as the increasing workforce, migration to urban centers for jobs, and hiring by IT companies gathering pace. 
• Additionally, co-living spaces generally offer a 20-30% discount on total housing costs compared to traditional rentals, making them an attractive and cost-effective option for individuals looking for affordable and hassle-free accommodation.
• This elevated return rate is particularly significant for individual investors, especially those who previously couldn’t invest in sectors, such as the commercial sector, due to a lack of industry know-how and high initial investment charges.

Factors fuelling the Growth of Co-Living spaces

• Diversification: Investing in these properties adds variety to a real estate portfolio, exposing investors to unconventional asset types primed for significant growth.
• Resilience: Co-working and co-living spaces show stability when the economy is uncertain. They have leases that can adjust and steady income, helping to limit risk.
• Collaboration and Innovation: Co-working spaces are great for sharing ideas and working together, leading to new and improved working methods. They bring people with different skills together, helping to spark fresh ideas and start new businesses. Co-living areas also let people collaborate and learn from each other, increasing creativity and work outcomes.
• Economic Growth through Job Creation: These co-working spaces are like nurseries for business ventures, where small businesses and startups can grow. They help the economy by creating jobs and giving startups the tools and contacts they need. Co-living spaces help the economy by making it easier for young talents to live and work in cities, who then spend money on local services and leisure, boosting the local economy.
• Renewing Cities: The growth of these spaces can help make cities better, turning unused areas into bustling communities. Giving new life to old buildings or industrial sites attracts people and money, enriching the neighborhoods. These spaces create lively areas supporting local shops and attractions, leading to better property values, nicer places, and a better quality of life for everyone.

Future Of Co-Working and Co-Living Spaces in India

• The future of co-working and co-living spaces in India looks promising, with both sectors expected to experience significant growth in 2024. 
• According to reports, the co-working industry in India is projected to grow at a CAGR of 13.5% between 2020 and 2025, while the co-living market is anticipated to double by 2024, reaching 450,000 units. 
• These growth projections are driven by the increasing demand for flexible workspace and accommodation solutions, the rise of startups, and the changing preferences of millennials and young professionals.
•  Additionally, the integration of technology, sustainability practices, and the expansion into smaller cities and towns are trends that are likely to shape the future of co-working and co-living spaces in India.
• Global real estate service provider JLL has observed a dramatic shift in the flexibility-oriented space market over the last five years. By the financial year 2023, the active flex space presence has reached an impressive 53.0 million square feet — a nearly fourfold increase since 2018. 
• Likewise, the nation’s co-living sector is projected to experience a compound annual growth rate (CAGR) of 17%, aiming to hit close to $40 billion within the next five years. Consequently, India is emerging as a fertile landscape for property developers, investors, and even new enterprises in the co-living niche.
• Originally concentrated in major urban centers such as Mumbai, New Delhi, Kolkata, Bengaluru, Chennai, Hyderabad, Pune, and Ahmedabad, this trend is now spreading to smaller tier-2 and tier-3 cities. 
• The push towards remote working, prompted by the COVID-19 pandemic, has further spurred this expansion as businesses seek to decentralize by establishing smaller offices near their employees’ residences.
• This shift has amplified the call for premium living arrangements, presenting a valuable opening for providers of co-living spaces to capitalize on the growing demand.

Bottom Line 

The real estate world is changing fast, and smart investors see the growing value in spaces for co-working and co-living. These new ideas are a perfect fit for what people want today and also make great investments that could grow and pay off over time. If investors get on board now, they can lead the way in this big change in how we think about investing in property.

Looking ahead, Indian real estate is set to attract bigger investments from different kinds of investors—like shops, big companies, property builders, and those who manage these spaces—because they all want a piece of this area that’s becoming more popular by the day. It’s smart to stick with reliable names showing they know how to make good money in this market for better investment profits.

Assetmonk is a pioneer in alternative real estate investment, and we understand the immense potential in the Indian commercial real estate industry. 

We make alternative assets, such as real estate, more accessible. We have customized investment options to suit individual financial goals like passive income capital appreciation and portfolio diversification.

 Our expertise is identifying opportunities with high yields within the retail, office, and industrial asset classes. This enables our investors to maximize profits while diversifying their portfolios. 

We offer various alternative investment options, such as fractional or joint ownership of high-end commercial properties, sub-leasing ventures, etc. Trophy locations with the potential for high Internal Rates of Return (IRR) are prioritized, and due diligence is done to ensure these provide profitable returns for our investors. 

FAQs

Q1. Why is there a rise in investment in co-living segments in India?

A. The investment in co-living segments in India is increasing because of the changing lifestyle preferences of young professionals and students who seek community living environments that offer all-inclusive amenities. The urbanization and a growing young workforce make co-living segments a lucrative option for investors.

Q2. Why are co-working and co-living spaces considered profitable in India?

A. Co-working and co-living spaces are considered profitable in India due to their high demand, ability to fetch higher rents per square foot compared to traditional leases, and lower vacancy rates. The changing urban lifestyle and work culture increase these segments’ profitability.

Q3. Can financial growth from investing in co-working and co-living spaces in India be significant?

A. Yes, the financial growth from investing in co-working and co-living spaces in India can be significant, given the high demand, scalable revenue models, and the potential for long-term capital appreciation associated with these investment types.