With the soaring commercial realty prices that most Indian cities have witnessed over the last decade, the trend shift from owning to renting is now becoming a norm. However, what is more fascinating is how renting as an industry has evolved by changing the role of commercial landlords from rent collectors to service providers.
Space-as-a-service, or as commonly abbreviated to SPaaS, is the concept that has brought about a paradigm shift in how the commercial realty industry in India is providing services to consumers.
For the less informed, SPaaS broadly encompasses rental models such as co-working, co-living and brand-boxing in which landlords provide the lessee with a slew of services from furniture, fixture, facility and communication management, and even staffing requirements. Globally, WeWork is arguably one of the best-known examples of a SPaaS provider and has already grabbed the attention of hardcore critics, traditional clients and the new-age entrepreneur. In India we are now witnessing a surge in the number of firms engaging in providing this revolutionary service to many notable clients with a great track record and testimonials to boast of.
Such SPaaS providers are bringing about a set of technology-enabled structural changes in the commercial real estate (CRE) marketplace in India using enablers such as high-speed data connectivity, ubiquitous use of smartphones, cloud computing and Internet-of-Things technology to also unlock more productivity and reduced operation costs which benefits both the lessor and the lessee.
To understand how SPaaS has been transforming the Indian commercial realty sector, one needs to delve into what necessitated this concept at the first place. India has seen an exponential growth in office space over the last decade driven by demand from sectors such as information technology (IT) and IT-enabled services, consulting and e-commerce with commercial real estate already crossing the 600 million sq. ft mark last year. Almost 20% of this real estate is leased and experts believe that leased space contribution will gain more prominence due to the high prices which deter many firms from investing in properties directly. Instead, most of these firms are switching over to all-inclusive working spaces that also offer flexible leasing terms to suit their requirements. Considering that most real estate are owned by individuals rather than companies, landlords have grasped this growing need and have been offering SPaaS renting models to these firms thereby ensuring stable rental yield as well as creating a reliable and reputable user experience around their CRE assets, which is the success mantra for them in the foreseeable future
Additionally, it is worthy to note that with increasing investments of private equity and venture capital investors to the tune of more than $ 5 billion in 2018 alone, the commercial real estate sector will continue to adopt more professional management approaches like SPaaS which bodes well for both the firms offering SPaaS services and also the consumers of CRE in India.
Just like the Renaissance period in the 14th century Europe that facilitated the transition to modernity, it can be assumed that SPaaS has played a crucial role in bringing about a similar renaissance-like change to the Indian real estate industry. And this seems to be just the start of a new era in modernization which is here to stay.