According to figures, 40% of all coworking spaces are profitable. This percentage has been rising for many years now. Also, the percentage of coworking spaces that lost money saw a distinct drop to 26%.
Coworking spaces still find themselves in a very new market. On average, they break even in the twelfth month after opening — that is, they are no longer accruing operating losses, but they are not making any profit either.
This low but rising average age partly explains the growing proportion of coworking spaces that are profitable. But playing for time doesn’t work well as a strategy for a successful coworking space. We have explored the factors which affect the profitability of a Coworking space while keeping statistics of Coworking spaces in mind.
The most influential factor is membership figures. The more members a company has, the more profits go up. It’s really not news that coworking spaces also function this way. Three in four coworking spaces with 200 or more members are past the break-even point. However, if they are not at capacity, profitability then sinks. Half of for-profit coworking spaces with few members don’t make a profit after a year.
Another, somewhat less critical factor is location. Coworking spaces increase their profit margins more often and more quickly the larger the surrounding area is. Small-town, rural, and even suburban regions clearly present operators with greater challenges in establishing a sustainable coworking space.
In the largest cities, with a million or more inhabitants, profitability tracks with the number of competitors. Where few coworking spaces exist, demand and membership are lower. The more competitors that are active, the stronger coworking spaces are in general. In cities where there are a LOT of competitors, though, profitability drops again. The fact that it’s mainly unprofitable coworking spaces that say there are ‘too many coworking spaces’ in the area is less surprising. Meanwhile, in some cities, there really is an oversupply of coworking spaces.
Private Offices is better than Meeting spaces
More and more coworking spaces are offering private and team offices alongside desks in open workspaces and they are seeing clear corresponding increases in income and profitability. But when revenues from this private office service dominate, it’s not just profitability that’s on the decline. The coworking concept itself is also challenged. Particularly if those offices remain unconnected with open workspaces.
Likewise, meeting spaces count as a good supplementary income stream. But too many of them can leave behind a big hole in the budget. If these rooms occupy more than one-fourth of the floor space or revenue, coworking spaces have a high chance of going bankrupt.
At the same time, private offices raise the percentage of dedicated workstations, which is also why coworking spaces with a large percentage of dedicated desks perform better overall. In general, a mix of the two approaches, with an emphasis on dedicated desks, seems to perform best.
Community building as well as online media activity — social media, blogs — are some of the most popular activities companies use to attract new members. However, only in big cities does active coworking-community building have a positive effect on profitability.
Mostly just two activities stand out as positive. Firstly, Coworking spaces should have websites which are search engine optimized. Secondly, participants in coworking visa programs are more likely to operate in the black than those that do not. Conversely, unprofitable coworking spaces are more likely than average to advertise or to hold events with other coworking spaces.