Retail

Co-working companies offer sops, waive rents to retain clients


BENGALURU: Several co-working space providers have waived rentals, or are providing rental discounts, for their customers for April, since most customers are not using the spaces on account of the lockdown. Some are doing it because they are worried that the clients, many of who pay on a monthly basis for each seat, will move away from them if they don’t provide concessions during this difficult time. For some of the space providers, the biggest customers are startups – a segment that has been among the worst hit, given their limited cash reserves.

WeWork India, the franchise arm of WeWork and run by billionaire Jitu Virwani’s Embassy Group, has decided to provide heavy discounts to its clients, industry executives said.

“Whatever the period of lockdown, they have told their clients that they only need to pay 30% rent for that time. This has been done to ensure at least some steady cash flow, and to not lose clients,” said one person aware of the development.

WeWork India CEO Karan Virwani did not respond to a request for comment. WeWork’s clients are a mix of corporates and startups.

Several companies said that clients plan to invoke the force majeure, or ‘Act of God’, clause in their agreements. This is a clause that allows a contracting party to not fulfil a responsibility when some unpredictable and extraordinary circumstances emerge.

Co-working space provider 91springboard’s CEO Anand Vemuri said given the Covid-19 situation, the company will not contest against force majeure. People familiar with the matter said 91springboard has not yet raised invoices for this month and plans not to do so even for the next.The company is also in talks with landlords of its 27 hubs to cut or waive rentals. It is asking its members to cover a nominal space management fee, which includes the cost of maintenance, internet and salaries of housekeeping and security staff, which is 20% of the membership fee.

Awfis, which counts Sequoia Capital and ChrysCapital among its major investors, has not waived rentals, but said whatever savings it incurs on lower electricity consumption and internet charges will be passed on to its clients. “For the buildings we have leased, which is about 40% of our portfolio, we too have asked for waivers. Only 20% of the landlords have agreed till now. It is a wait-and-watch situation,” said CEO Amit Ramani.

An executive of Blackrock-backed firm GoWork said most of its clients have asked for a rent waiver. He did not say how GoWork would respond. But he indicated that the job situation is so bad that even if clients renew contracts, it will be for far fewer seats. CoWrks, owned by Bengaluru-based office developer RMZ Corp, said it hasn’t waived rentals for its clients nor has asked its parent company to do so. “But if the lockdown extends, we may change our position,” Siddharth Menda, founder and vice-chairman, said.

Even before the pandemic, co-working space providers were under pressure due to greater investor scrutiny and an increasingly difficult environment to raise funds after WeWork’s botched IPO. It has now become significantly worse with the swanky spaces, with all modern amenities and recreational facilities, being deserted. Industry analysts believe an industry consolidation is inevitable.





READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.