Hard Times: A coworking space owner sees a silver lining despite scaling down business

In 2019, Scroll.in’s Hard Times series sought to explain and illustrate how India’s slowest economic growth in a decade was affecting ordinary people. This followed reporting by Scroll.in in 2016 and 2017 on the effects that demonetisation had on the lives of Indians around the country.

As the world continues to grapple with the Covid-19 crisis, Hard Times now takes a look at the impact of India’s draconian lockdown on individuals and firms from all corners of the economy. Read all of the pieces in the Lockdown Hard Times series here.

In September 2016, when 31-year-old Mukul Pasricha ventured into opening a coworking space, he started off with a pilot project that could accommodate just 120 people in a space in Gurgaon, Haryana.

By the end of 2019, the venture named Spring House Coworking had expanded across 14 locations spread out in Delhi, Gurgaon, Noida and Lucknow in Uttar Pradesh with around 3,500 seats in total that included private cabins, conference rooms, single seats and event spaces.

At the time, the company had a total of 52 employees including accountants and office assistants. And among the 14 locations, the biggest coworking space was in DLF Grand Mall, Gurgaon, which had around 650 seats. The company was entirely bootstrapped – meaning it used its own funds to grow – and had only started to consider getting funding from external sources in the beginning of 2020.

“Shared economy was just coming in as a concept, whether it was coworking or coliving because the real estate prices were so high,” Pasricha said.

“Everything was going sort of as per plans,” he said. “But with the entire Covid fiasco coming in, plans have turned 360 degrees.”

When the nationwide lockdown was enforced, all the coworking spaces run by Pasricha remained shut from March 24 till May 4.

“Eighty per cent of our revenues have been wiped out,” he said.

Scaling down

Once the lockdown was imposed, a major concern for Pasricha was the question of rent, even though the workspaces were shut. The company told the landlords in different locations that they would be unable to pay rent till the lockdown was lifted by the government, Pasricha said. But not all landlords accepted this.

And many raised questions about why the business was not roaring after lockdown rules relaxed.

“The landlords ask me why the location is not performing,” Pasricha said. “But even they are not going to their own location because they are scared of the virus, that is the irony.”

These expenses also included paying for electricity as well as a monthly common area maintenance charge that would vary in different locations.

For instance, the fixed load electricity charge for a coworking space measuring 25,000 square feet is around Rs 1,20,000, he said. The common maintenance charge was between Rs 8 to Rs 18 per square feet depending upon the location of the coworking space.

“We have managed to get some discounts of these charges because landlords understand that if we go then they will have to pay it,” Pasricha said.

By the end of June, Pasricha said that the company had downsized from 14 coworking spaces to 11 spaces in Delhi, Gurgaon and Noida, by paying exit fees and forfeiting deposits they paid initially to landlords.

This has reduced the total number of seats from 3,500 to 1,700.

The spaces that were shut down were the ones that brought in lesser revenues and were also smaller where it would be impossible to maintain physical distancing, he said. But the company intended to scale down even further and hold on to only seven spaces.

The business had downsized in terms of the number of employees as well.

Out of the 52 employees, only 28 remain currently. “The idea is to keep our operational costs as low as possible for now,” Pasricha said. “We have tried our best not to fire a lot of people. The intention is that we pay them less salaries but keep them on our payroll.”

Some employees went back to their hometowns in states like Bihar and Uttar Pradesh, he said, adding that the company paid them two months’ salary before they left.

“They did not have a sense of security here,” he said. “They are just staying put for now. We have given them the option of coming back whenever they feel comfortable and provided we have work as well. But we do not have any concrete decision.”

Unlocking and reopening

In the last three months, work from home became the norm for nearly all businesses as their offices remained shut during the lockdown. For Pasricha, this meant that nearly 70% of the company’s membership base was wiped out. “Those members either shut their business or worked from home,” he said.

As several businesses reopen and the economy unlocks, the company saw minimum footfall at its coworking spaces. By May 12, the company’s biggest coworking space at DLF Grand Mall had just about 20 seats occupied out of 650.

To encourage more members to come to the space, Pasricha said that the company started to offer six-month discounts. For instance, the company gave a 70% discount to its regulars for the months of April and May, and between 30% and 50% discount in June.

“Some tech companies who are doing well have agreed to pay us the full amount,” he said. “We are staying afloat somehow.”

Additionally, the company has made several changes in its operations to ensure safety and cleanliness. For instance, every member gets thermally screened for their temperature before they can enter the premises. Along with this, they have to mandatorily use Aarogya Setu, the government’s contact tracing app, and sign a self-declaration form stating that they do not have any Covid-19 symptoms.

This has led to an increase in the company’s operational costs, Pasricha said. “It has gone up by Rs 2 per square foot because of the sanitisers and hygiene material that is needed more frequently,” he said.

The number of people using coworking spaces seems to have increased by a slight margin within a month. By the end of June, around 90 members started to turn up at the spaces across 11 locations.

But the revenues were still far below earlier numbers. “We are at 30% of total revenue we used to make before the lockdown,” Pasricha said.

Despite the sluggish pace of the economy, the entrepreneur said he sees a silver lining for coworking spaces. Organisations with a higher number of employees were looking at using coworking spaces more often, he said.

“No one is looking to work out of an office space with their full capacity,” he said. “Even if one-third of the employees turn up, it is a big deal. They are rotating on the same seat.”

Pasricha said that more employees would step out of their homes if there were safe coworking spaces in their neighbourhood.

“Work from home as a concept cannot exist forever,” he said. “It is a threat because commercial real estate value is going down because there is no footfall. But coworking as an industry will bounce back because neighbourhood spaces will be big. The idea is to hold on to your inventory as much as possible.”

Read the other articles in this series here.