IPOs by flexible workspace firms: Sharing to grow

Is Awfis’s IPO a starting point?

Awfis Solutions Pvt. Ltd is set to become the first co-working operator in the country to launch an initial public offering (IPO) and list on the stock exchange. As one of the largest co-working operators today, if the Awfis IPO launch is a success, it would set a precedent for more public listings in India’s young flex workspace sector going forward. Just as the launch of Embassy Office Parks Reit’s IPO in 2019 opened the floodgates for multiple public listings by other office and retail real estate investment trusts in the country, the Awfis IPO is likely to do the same for the shared workspace segment.

Read more: Enam's Bhansalis, others to buy 40% stake in WeWork India for ₹1,200 crore

Will the sector attract more capital?

A number of flex workspace operators are expected to raise long-term capital and onboard more institutional investors. This would give operators access to capital to scale up their business faster. They are also set to attract different kinds of investors—including growth capital, private equity, real estate, high-net-worth individuals and family offices—as well as venture debt and structured credit. As the firms grow profitably, investors will gain confidence. In one of the largest investments in the sector, Enam Holdings promoters with their partners are set to buy 40% in WeWork India for ₹1,200 crore.

Who else is looking at launching an IPO?

WeWork India, IndiQube and Smartworks are expected to chart out an IPO roadmap and start preparations in the next couple of years. These firms, which have multi-city presence and are backed by institutional investors, have shored up their revenues, and are looking to grow further. Investment bank Avendus Capital expects at least four operators to list in 2-3 years.

How will the overall office sector benefit?

The flex workspace sector is projected to reach 126 million sq. ft by 2028, up from 61 million sq. ft in 2023, grabbing a larger share of the overall office market, as per an Avendus Capital report. Flex operators are already one of the top drivers of office leasing. As operators grow in size, go for public listings or raise institutional funding, they will expand heavily and take up more office space. Going ahead, the growth in office leasing beyond the top cities will also be led largely by flex operators.

Read more: Startup investors are hunting outside unicorn zone

What will fuel growth in this sector?

The flexible workspace market is expected to outpace the traditional commercial office sector, led by the asset-light office expansion strategies and work-from-anywhere policies. Modern office solutions will drive growth, as more firms explore managed, agile workplaces. Both traditional and new-age companies, along with the continuous influx of global capability centres (GCCs) will drive demand. Taking up space from a flex workspace operator can lead to nearly 15-20% cost savings for a customer.