Coworking Spaces Seek Relief From Rent, Bills As Startups Exit

Zealous entrepreneurs along with their enthusiastic employees, brewing coffee and innovative ideas, are now missing from coworking spaces in India, thanks to the lockdown and Covid-19. Besides impacting the businesses of startups, the lockdown has also paralysed the everyday operations of coworking space providers.

Currently, owners of these coworking spaces are facing severe losses. With no relief from the government, the situation is going to worsen soon.

Speaking to Inc42, Awfis founder Amit Ramani said that coworking offices are finding it difficult to pay their fixed costs right now. These costs include electricity charges, employees costs, among other things, he added.

“People are not coming to our space due to the lockdown and we see no new business conversions any time soon,” said Ankit Sachdeva, chief growth officer of Co-Offiz.

Incubex’s cofounder Taju Abraham said that there are multiple challenges faced by coworking space providers right now. To start with, he noted that there have been instances where the renewal of the contract is not happening with the clients.

The reason behind this is quite simple. The majority of customers for coworking space are startups. As a result of the lockdown, startups have faced severe disruptions, leading to mounting losses and have curtailed operations or moved to work from home. Even those startups that are running as part of the essential services are trying to minimise office space costs.

According to coworking space aggregator CoFynd’s CEO Atul Gupta, the situation is worse for coworking spaces that offer daily and weekly plans, since they used to rely heavily on this high-churn rate, while long-term rental contracts are relatively more ironclad.

Rough Time For Coworking Spaces

After last year’s WeWork debacle, coworking space providers had already looked to go towards a more sustainable model rather than scaling up rapidly. While many might have thought that the worst period for the industry is over, the coronavirus lockdown has changed things forever.

Currently, coworking spaces have problems like retaining employees and paying salaries on time as clients have not yet paid up. But some costs such as maintenance and utility bills such as electricity and internet will not go away in the meanwhile. With no revenue coming in, even basic safety and hygiene compliance has become a burden.

CoworkIn founder Yatin K Thakur said, “There are heavy overhead costs which are to be incurred by the coworking space providers to meet the government orders of statutory compliance especially with regards to payment of salaries.”

With startups going through a rough patch, coworking spaces don’t just have to worry about the cancellation of contracts but also about the low occupancy due to layoffs at many startups which have come as a part of cost-cutting.

Most of these challenges are across industries.

“Surely, there will be a short-term impact, but in the long run, everything will come back to normal,” Ramani said.

In some circumstances, many startups have even failed to clear their past dues, while others are not taking up possession because of the cash crunch. The situation worsens where coworking space providers are already bearing the capital expenditure.

Can Coworking Startups Find A Way Out?

As of now, coworking spaces are left with no option but to look towards the government for a bailout package. Some coworking players are expecting that the government could consider a full rental waiver for the duration of lockdown plus 30 days to help the industry sustain. Other recommendations such as early refunds for TDS and GST and easier loans facility post the lockdown are also sought by them.

CoworkIn is part of the Coworking Association in India which also counts around 40 coworking space providers, including WeWork, 91Springboard, Awfis, and looking to raise the industry’s demands to the policymakers. The association is looking to writing a letter to finance minister Nirmala Sitharaman for government intervention in this regard.

Additionally, it has called on the government to provide relief in the form of a moratorium on electricity, internet and other municipal utility bills. “We are also seeking support from some short term debt lending and fast-tracking our tax refunds, which take up a significant amount of working capital from coworking and shared workspaces,” Thakur told Inc42.

Many startups have also turned to deep-pocketed clients for help. OYO-owned Innov8’s CEO and founder Ritesh Malik believes that large enterprise clients will help keep the business moving after the lockdown ends, even though some early-stage startups or independent professionals have already submitted force majeure notices.

Currently, most companies are working remotely due to travel restrictions, using productivity tools such as Asana, Slack, Microsoft Teams, Zoom and more to run their operations efficiently.

The new reality has led many to realise that working from home is a viable option even after lockdowns end. For instance, POSist cofounder and CEO Ashish Tulsian said that the company is planning to operate remotely for three to four days a week. Others have also pointed to the flexibility offered by a remote workforce.

Ramani said that while the government might extend the lockdown beyond April 14, it might ease restrictions. He was hopeful that startups will come back and work from offices.