Tier II and III cities are witnessing a growth in the number of start-ups based out of there. This also means that the requirement of office spaces is also growing in these cities October 8, 2018 4 min read You're reading Entrepreneur India, an international franchise of Entrepreneur Media. Gone are the days when you started your own business, a major setback was the rent you had to pay for your office space. Start-ups, with their small teams, today prefer to start off by working out of a co-working space instead of renting an entire place for themselves. While this trend began with the start-up hubs in the country, it also meant it got restricted to the metropolitan cities of India considering the spurt of start-ups was seen in these cities mostly. But as the times are changing, Tier II and III cities are witnessing a growth in the number of start-ups based out of there. This also means that the requirement of office spaces is also growing in these cities, which is why co-working spaces too are now popping up in Tier II and III cities. Entrepreneur India spoke to founders of co-working spaces about the growing need of having more collaborative workspaces in smaller cities. The Innovation Landscape is Changing While cities like Bengaluru, Hyderabad, Mumbai and Delhi have a vibrant start-up culture, the Indian innovation landscape is not restricted to them. Start-ups from Tier II and III cities too are standing up to make a difference and name for themselves in the country. Ashish Gupta, Director of SERENIA co-working spaces points out that in the last decade, the contours of ‘urban India’ have changed and blotted outside its well-known ‘metro’ cities. Businesses have opened their eyes to the fact that there is more to India than Delhi and Mumbai! According to a report by Boston Consulting Group (BCG), the population in tier II-IV will increase 4.5 times by 2025, while their spending on FMCG will be around 104bn USD by the same year. Gupta further explained that these days startups are emerging from cities such as Jaipur, Bhubaneswar, Pune and Ahmedabad. “This is largely due to the availability of talent, state government initiatives, local investor confidence and infrastructure support. As the definition of the quintessential Indian metro evolves, startups are rapidly embracing these smaller cities over the bigger metros,” he said. The Growing Need for Co-working Spaces in Smaller Cities Owing to this innovation growth that is now spread across the country, the availability of co-working spaces is also important. Meghna Agarwal, Co-Founder & Chief Creative Officer, IndiQube too agreed. She said that as the start-up culture is becoming more prevalent in not just Tier 1 cities but also in Tier 2 and 3 cities, co-working spaces are becoming more and more popular among the young crowd. “They are being consumed more as ecosystems that nurture start-ups and young talents and offer a platform to grow irrespective of where they are coming from,” she said. Agarwal said that reverse migration is one of the key features for the rise in economic activities for millennials who are now looking to be on their own with the same expectations of the Tier 1 facilities. With increasing rental prices, it’s difficult for start-ups to keep up. Gupta said that it is a highly expensive affair for a company of any size to lease a traditional office in an urbanized area. The situation is even more alarming for start-ups and individuals who are yet to make a mark in their industry and are not sure about the cash flow. “In such a situation, co-working comes across as a fresh breath of relief. To lease a traditional office, you will have to fork out a fixed initial amount that includes a refundable deposit, advance maintenance charge and other expenses for necessary entities like office furniture, gadgets, installation of electrical fittings, etc,” he explained. The talent pool too is now noticeably growing in the smaller cities. Many start-ups have actually shifted their base to Tier II and III cities as they find cheaper resources with great talent in these cities. Nakul Mathur, MD, Avanta Business Centers believes that it’s high time that the focus shifts to Tier II and Tier III cities, as there is a lot of talent in these cities which needs a professional workspace and nurturing. “There are ample locally owned and operated Coworking facilities in Tier II Cities and a few in Tier III cities. The density of startup’s in Tier II cities is low which is keeping branded co-working spaces to stay away for now. Service providers will need to find the right balance to make the venture profitable,” he said.
Co - workspace operators have begun expanding into tier II and tier III cities in India to serve to growing number of emerging start - ups . A report by Boston Consulting Group predicts the growth in tier I - IV cites will increase 4.5-fold over the next five years .