Demand for flex spaces is picking up in tier-II cities: Harsh Lambah, country manager for India, IWG

Harsh Lambah

As India battles a second wave of Covid infections, enterprises are increasingly exploring a hub-and-spoke model for employees to enable them work from closer to their homes, said one of the world’s largest flexible office space operators, IWG Plc. IWG’s country manager for India Harsh Lambah told FE’s Rishi Ranjan Kala that the firm is eying expansion in Tier-II towns like Panipat and Cochin as they are witnessing a pickup in demand from suburban towns and areas. Edited excerpts:

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How would you describe the industry’s experience with Covid?
In wave one, there was a lot of pain. We also heard from a lot of enterprises that they told employees to work from home, and January 2021 is when they would take a decision on real estate planning.

We saw good growth coming in from November-December 2020 onwards as we emerged from wave one, and in fact, March 2021 was our best month in terms of sales and occupancy during the Covid. In April and May, the second wave hit us. We experienced its impact — which is that the pipeline has become less robust. The forward order book has slowed down.

With the second wave, there has been a lot of gloom and pain. But we see some green shoots. It seems wave two is ebbing down, but south India will take a little more time. I’m hoping that it happens in mid-June, and then we should be back on building our customer base.

What trends are you witnessing?
Commercial real estate would be impacted as there will be a change in requirements from corporates and enterprises, which are large occupiers. Specific to our hub-and-spoke model, a lot of it has come through extensive discussions with enterprises. People want flexibility in work-life balance.

Second, they do not want to commute long distances. We recently offered customised solutions to global enterprises like Standard Chartered Bank, Staples and NTT. They are looking at a hybrid model where they can take memberships from us and use any of our workspaces globally. They are reducing dependence on headquarters. Another is because demand dropped in central business districts, we saw a lot of demand pickup in suburban areas like Sonipat or Panipat.

We are very keen to open our workspaces in such areas because we have had a tremendous experience in tier II cities; today we are the only global player with workspaces in cities like Vizag, Coimbatore, Ahmedabad, Lucknow, Chandigarh, Jaipur, etc. We want to expand even more into tier II cities.

How hopeful are you about business continuity?
We had to consolidate some centres in wave one, where either demand had gone down, or lease was going to expire. We restructured our portfolio, curtailed costs and expenses to allow for greater cash flow.

For customers, we rolled out Covid-specific offers to make sure they have the cash flow to focus on their business because their success allows us to grow as well. We have done that through wave two.

While discussions with Fortune 500 and global companies are happening in the US office, in India too, we are talking to a lot of large enterprises.

We are going to them, offering customised proposals, either a fixed office space where people can move into and they have the flexibility and convenience on terms or location, and to ensure they have the agility to get back to action quickly in case of any further business disruptions.

How has consolidation fared for the industry?
A lot of unorganised, or 1-2 centre players have shut shop because they could not survive Covid. We are also seeing a lot of players reach out to us in terms of acquisition. We are evaluating whether they meet our strategy on expansion and fit in our growth plans.

I believe that towards the end of the year, there will be a handful of players left from the 300-500 players present in 2017-18 when this sector was growing really fast. So, it will be the large and organised players who remain, while the rest would shut shop or would have been acquired.

What are your expansion plans in India?
Globally, we have 3,300 location in over 100 cities. In India, we have 100 locations in 16 cities. Here, we have Regus and Spaces.

Now we are looking to bring in HQ at the right opportunity. It is doing very well in the US and Europe and is ideal for expansion in tier II cities like Cochin and Trivandrum.
Either we will acquire a player which has presence in tier II cities and brand them HQ or we will build it organically. It will be a basic model tailored for tier II cities, given that their ability to pay would not be at par with major metros.