How much should my coworking space budget for leasing or purchasing a comfortable location?

This article was written by our expert who is surveying the industry and constantly updating business plan for a coworking space.

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How can you budget wisely for leasing or buying a comfortable location for your coworking space without overspending?

How much does it usually cost per square foot to rent a coworking space in a big city?

What should I plan to spend on utilities for a coworking space?

How much of my budget should go towards furniture and equipment?

What should I expect to spend on marketing for a new coworking space?

How long is a typical lease for a coworking space?

What should I budget for renovations and build-outs?

What occupancy rate should a successful coworking space aim for?

How much should I set aside for staff salaries in a coworking space?

What is the average monthly income per member in a coworking space?

How much should I allocate for technology and software in a coworking space?

When can a coworking space expect to break even?

What should I budget annually for maintenance and repairs?

These are questions we frequently receive from entrepreneurs who have downloaded the business plan for a coworking space. We’re addressing them all here in this article. If anything isn’t clear or detailed enough, please don’t hesitate to reach out.

The Right Formula to Budget for Leasing or Purchasing a Comfortable Coworking Space Location

• 1. Conduct market research and analyze coworking trends:

  Research the coworking market in your city: identify the demand for coworking spaces, study the types of spaces that are most popular, and examine local regulations and zoning laws that may affect your business.

• 2. Determine space requirements:

  Calculate the total square footage needed based on the number of members you plan to accommodate and the average space requirement per member. Consider the mix of private offices, dedicated desks, and hot desks you intend to offer.

• 3. Analyze leasing costs:

  Research the average leasing cost per square foot in your area. Multiply this by the total square footage required to estimate the annual leasing cost. Don't forget to include additional costs for utilities, maintenance, and other operational expenses, typically a percentage of the leasing cost.

• 4. Evaluate purchasing costs:

  Research the average cost per square foot for purchasing commercial real estate in your area. Calculate the total cost for purchasing the required space. Consider the down payment needed and the financing options available, including interest rates and loan terms, to determine the monthly and annual mortgage payments.

• 5. Compare leasing and purchasing options:

  Compare the total annual costs of leasing versus purchasing, including initial down payments and ongoing expenses. Consider the long-term financial implications and benefits of each option to make an informed decision.

A Practical Example to Personalize

Substitute the bold elements with your own data for a customized project outcome.

To help you better understand, let’s take a fictional example. Imagine you are planning to open a coworking space in a mid-sized city with a population of 500,000. You aim to accommodate 100 members, offering a mix of private offices, dedicated desks, and hot desks.

Based on market research, the average space requirement per member is approximately 50 square feet, leading to a total requirement of 5,000 square feet. In this city, the average leasing cost for commercial real estate is $25 per square foot annually. Therefore, the annual leasing cost would be 5,000 square feet multiplied by $25, totaling $125,000.

Additionally, you should budget for utilities, maintenance, and other operational expenses, which typically amount to 20% of the leasing cost, adding another $25,000.

If you consider purchasing instead, commercial properties in this area average $200 per square foot. Thus, purchasing a 5,000 square foot space would cost $1,000,000. Assuming a 20% down payment, you would need $200,000 upfront, with the remaining $800,000 financed through a mortgage.

At a 5% interest rate over 20 years, the monthly mortgage payment would be approximately $5,280, or $63,360 annually. Including the same $25,000 for utilities and maintenance, the total annual cost for purchasing would be $88,360.

In conclusion, if you choose to lease, you should budget approximately $150,000 annually, whereas purchasing would require an initial $200,000 down payment and an annual budget of about $88,360.

With our financial plan for a coworking space, you will get all the figures and statistics related to this industry.

Frequently Asked Questions

What is the average cost per square foot for leasing a coworking space in a major city?

The average cost per square foot for leasing a coworking space in a major city can range from $50 to $100 annually.

This cost can vary significantly depending on the location, amenities, and demand in the area.

It's important to conduct a market analysis to determine the most competitive rate for your specific city.

How much should I budget for utilities in a coworking space?

Utilities for a coworking space typically account for 5% to 10% of the total operating budget.

This includes electricity, water, internet, and other essential services required to keep the space functional.

Efficient energy management and sustainable practices can help reduce these costs over time.

What percentage of my budget should be allocated to furniture and equipment?

Furniture and equipment should generally take up 10% to 15% of your total budget for setting up a coworking space.

Investing in ergonomic and durable furniture can enhance the comfort and productivity of your members.

Consider leasing options for equipment to manage upfront costs effectively.

How much should I expect to spend on marketing for a new coworking space?

Marketing expenses for a new coworking space can range from 5% to 10% of your total budget.

This includes digital marketing, local advertising, and promotional events to attract potential members.

Effective marketing strategies are crucial for building brand awareness and filling your space quickly.

What is the typical lease term for a coworking space?

Lease terms for coworking spaces typically range from 3 to 5 years.

Longer lease terms may offer more favorable rates but require a greater commitment.

It's essential to negotiate terms that allow flexibility for expansion or relocation if needed.

How much should I budget for renovations and build-outs?

Renovations and build-outs can cost between $50 and $150 per square foot depending on the extent of the work required.

This includes costs for construction, design, and any necessary permits or approvals.

Working with experienced contractors can help ensure the project stays within budget and on schedule.

What is the expected occupancy rate for a successful coworking space?

A successful coworking space typically maintains an occupancy rate of 80% to 90%.

High occupancy rates are crucial for covering operational costs and generating profit.

Offering flexible membership options and fostering a strong community can help achieve these rates.

How much should I allocate for staff salaries in a coworking space?

Staff salaries generally account for 15% to 20% of the total operating budget in a coworking space.

This includes salaries for community managers, administrative staff, and any additional support roles.

Competitive salaries and benefits are important for attracting and retaining skilled employees.

What is the average monthly revenue per member in a coworking space?

The average monthly revenue per member in a coworking space is typically between $200 and $500.

This figure can vary based on membership plans, location, and additional services offered.

Maximizing revenue per member involves offering value-added services and premium membership options.

How much should I budget for technology and software in a coworking space?

Technology and software expenses should account for 5% to 8% of your total budget.

This includes costs for coworking management software, security systems, and communication tools.

Investing in reliable technology is essential for providing a seamless experience for your members.

What is the break-even point for a coworking space?

The break-even point for a coworking space is typically reached within 12 to 24 months of operation.

This depends on factors such as initial investment, operating costs, and membership growth rate.

Careful financial planning and effective marketing strategies can help achieve profitability sooner.

How much should I budget for maintenance and repairs annually?

Annual maintenance and repair costs for a coworking space should be budgeted at 1% to 3% of the property value.

Regular maintenance is crucial for ensuring the safety and comfort of your members.

Proactive maintenance can help prevent costly repairs and extend the lifespan of your facilities.