Co-working Startups Expand Fit-Out Services to Drive Growth
Co-working startups like Awfis, IndiQube, Smartworks, and BHIVE are expanding their fit-out services to meet the growing demand for aesthetically pleasing and customised workspaces. These companies are leveraging their core expertise in designing and mana
Coworking StartupsFitout ServicesFlexible WorkspacesCommercial Real EstateOffice RenovationReal Estate MumbaiOct 27, 2024
Fit-out services encompass a wide range of tasks, including the installation of floors, ceilings, interiors, and furniture. Traditionally, the fit-out market has been fragmented, dominated by large developers, design firms, and property consultants. However, the rise of co-working spaces has introduced a new player with unique advantages.
“The core business of flexible workspace operators involves designing, building, and managing offices for multiple customers, which allows them to hold fit-out inventory, negotiate vendor contracts, and establish set templates and processes,” explained Ananta Capital-backed Smartworks in its IPO documents, highlighting the market opportunity in the fit-out-as-a-service space.
PeakXV-backed Awfis, which made its public debut in May, generates about 25% of its overall revenue from fit-out services. In the fiscal year 2024, the company recorded Rs 212 crore from fit-out projects, with a total revenue of Rs 850 crore. Notably, 50% of this Rs 212 crore came from third-party clients who engaged Awfis solely for fit-out services.
“We believe the fit-out industry will grow between 12-13% over the next few years, while our fit-out business will grow between 13-15% due to our ability to deliver services faster,” said Awfis chairman and MD Amit Ramani. He also mentioned that while the industry gross margin in fit-out services is between 8-10%, Awfis maintains an average margin of around 15%.
Awfis began building its fit-out business about three years ago and currently employs more than 60 people in its design team and about 120 people in the project, construction, and procurement management team.
The demand for bespoke interiors with customisation options is high across the board. Meghna Agarwal, co-founder of IndiQube, sees an opportunity in developing fit-outs for modernising older properties in cities like Mumbai, which has a large inventory of outdated properties. “India’s commercial real estate market stands at nearly 800 million square feet, with an annual absorption of 40-50 million square feet. The real potential lies not only in new fit-outs but also in the renovation and retrofitting of older office spaces,” she said.
Smartworks, in its documents, noted that flexible workspace operators have full-time delivery teams on their payroll, which helps them build cost and design-efficient offices quickly, allowing them to compete effectively with traditional players. The company recently ventured into the fit-out-as-a-service space through a project in Powai, Mumbai, spanning 0.18 million square feet with a seat capacity of 3,790.
Fit-out costs vary widely, with an average of Rs 1,800-2,000 per square foot. However, highly customised projects can cost significantly more. For instance, the fit-out costs for Rakuten’s office in Bangalore reached as high as Rs 8,000 per square foot due to extreme customisation. Aditya Verma, founder and CEO of The Office Pass, observed that fit-out costs have risen from Rs 1,400 to Rs 1,800-2,000 per square foot in the last six years, and for highly customised managed offices, the cost can go up to Rs 2,700. “Six years ago, this entire cost was absorbed by us, but now, most property owners are willing to share the cost, especially for longer-term tenants,” he added.
Shesh Rao Paplikar, CEO of Bengaluru-based BHIVE Workspace, noted that lock-in periods are higher for highly customised built-to-suit projects. “We’ve successfully completed large customised projects like the Rs 75 crore Nuvama deal in Mumbai’s BKC, but such cases are exceptions. Most mid-sized GCCs and enterprises prefer flexibility and shorter lock-in periods while working with one entity rather than multiple vendors,” he said.
Frequently Asked Questions
What are fit-out services in the context of co-working spaces?
Fit-out services include the installation of floors, ceilings, interiors, and furniture. These services are provided to create customised and aesthetically pleasing workspaces for clients.
How do co-working startups like Awfis and IndiQube expand their fit-out business?
These startups leverage their core expertise in designing and managing offices to offer fit-out services. They have full-time delivery teams, well-negotiated vendor contracts, and established processes to deliver services efficiently and cost-effectively.
What is the current market size for commercial real estate in India?
India’s commercial real estate market stands at nearly 800 million square feet, with an annual absorption of 40-50 million square feet. The real potential lies in both new fit-outs and the renovation of older office spaces.
How have fit-out costs changed over the past few years?
Fit-out costs have risen from Rs 1,400 to Rs 1,800-2,000 per square foot in the last six years. For highly customised managed offices, the cost can go up to Rs 2,700 per square foot.
What are the advantages of co-working startups in the fit-out market?
Co-working startups have full-time delivery teams, well-negotiated vendor contracts, and established processes. They can build cost and design-efficient offices quickly, allowing them to compete effectively with traditional players.
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