Tier 2 and 3 Market Likely to See Growth in Co-Working Space

A co-working space makes it easier, shortens that gap and allows one to start work almost immediately
Tier 2 and 3 Market Likely to See Growth in Co-Working Space
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Founder and CEO, Alea Consulting
4 min read
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Co-working spaces comprise of diverse groups of remote workers, freelancers and other professionals. They are a practical, flexible and cost-effective approach to solve the problem of finding suitable workspaces in cities. These spaces give freedom to work at one’s convenience for short, medium or even a longer time period. 

Co-working in India

In India, co-working spaces were introduced post acceptance in Europe and USA. The difficulty associated with renting an office space in cities like Delhi, Hyderabad, Mumbai, Bengaluru and others led to this concept gaining popularity. Traditional workspace meant high security deposits, which also involved the issue of getting this deposit back. Reliable internet,that is high-speed dedicated 1:1 data lines in India are still amongst the most expensive in the world. Labour issues, lack of quality infrastructure coupled with unreliable and unsteady utilities were also some of the reasons why shared workspaces became accepted rapidly. 

Tier 2 and 3 Cities 

Naturally, the initial focus of co-working space has been in Tier 1 cities as the initial investment is high, and these would have been deemed as the safest bets in terms of ROI.  Large cities were generating the most employment and there is a lot of inward migration, which meant that co-working spaces were sought after. Today, cities like Bangalore, Delhi and Mumbai have the maximum co-working spaces, however Kochi, Indore, Jaipur, Chandigarh, and Ahmedabad are beginning to see a similar demand. There are many reasons for this trend:

Government Promotion

The Smart Cities Mission was launched in 2015 to tackle the escalating problems being faced in urban areas. While many big cities succeeded in enlisting themselves under the scheme, it is smaller cities that are showing visible progress. By 2030, it is estimated that India will have 104 Tier 2 cities and 331 Tier 3/4 cities and only 155 Tier 1 cities. The ‘Make in India’ movement of the Government is encouraging Tier 2/3 cities to build, and this will lead to people relocating closer to home. This also translates to an increase in opportunity in these places that could see a lot of development and even the advent of more co-working spaces. 

Choking Cities 

A workspace ought to be easily accessible to employees. It should also be conveniently located for potential clients or visitors. Today, Tier 1 cities face a lack of prime locations due to saturation, parking problems and associated costs. External agencies charge INR 250 for valet parking. Co-working spaces can expand to smaller cities. Tier 2 and 3 cities have more affordable spaces to offer; have a better quality of life and lower property taxes and rates. What’s more? With fewer inhabitants, commuting to any destination within the city traffic is not a nightmare. All this makes Tier 2 and 3 cities more feasible for expansion.

Emerging Entrepreneurs in Tier 2-3 Cities

Smaller cities have technologically trained millennials, who are experts in gaming, computer languages, media, editing, web development and more. For these skilled professionals to lease a reliable location and infrastructure in a Tier 2 or 3 cities, there could be a delay of weeks, if not months. A co-working space makes it easier, shortens that gap and allows one to start work almost immediately.

Quality Workspaces

Co-working spaces offer high quality offices that are accessible 24x7, and that too at a reasonable cost. Some estimates indicate savings of as much as 30per cent in cost as opposed to a traditional self-managed office. This makes Tier 2 and 3 cities an attractive option.

Short Term Projects

Indian, as well as international entities evaluating expansion, requires spaces in Tier 2 and 3 cities. This need may at times only be for short periods of time. The reasons may include mining, dams, bridges, telecom market or other specialist studies. These are likely to create client demand for co-working spaces in such locations.  

Companies prefer co-working spaces to conventional ones due to lower operational costs and a flexible work environment. Tier 2 and 3 cities in India have a lot of advantages as they are flexible, have a scope of work and include prime land availability at a lower cost. It helps that client demand will work in their favour and all this is likely to expedite India’s overall growth rate.

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