Data provided here comes from our team of experts who have been working on business plan for a coworking space. Furthermore, an industry specialist has reviewed and approved the final article.
Are coworking spaces really profitable? How much they generate?Let's check together.
Revenue metrics of a coworking space
How does a coworking space makes money?
A coworking space makes money by charging members a fee for access to the space and its amenities.
What are the revenue streams of coworking spaces?
Coworking spaces generate revenue through several key streams.
The primary source is membership fees, where individuals or companies pay for access to the shared workspace and its amenities, often with different tiers offering varying levels of access and benefits.
Another significant income avenue comes from private office rentals, allowing teams to have dedicated spaces within the coworking environment. Meeting and event space rentals also contribute to revenue, enabling businesses and organizations to host workshops, conferences, and seminars.
Some coworking spaces offer virtual office services, such as mail handling and phone answering, generating additional income. Ancillary services like printing, copying, and office supplies can also contribute to the bottom line.
Partnerships with service providers like coffee shops or fitness centers, as well as offering premium add-ons like high-speed internet or premium furnishings, can create supplementary revenue streams.
What about the prices?
A coworking space offers various pricing options based on the services and amenities it provides. The prices can vary depending on factors like location, membership type, and included features.
Generally, coworking spaces offer flexible plans such as daily passes, ranging from around $20 to $50 per day, which allow occasional usage. Weekly passes may fall in the range of $75 to $150. Monthly memberships, which are popular among regular users, can range from approximately $150 to $500 per month, offering access to shared workspaces, high-speed internet, and basic amenities.
Some spaces have tiered memberships with increasing benefits, such as private office access or meeting room credits, ranging from $300 to $1000 per month. Dedicated desks, providing a permanent workstation, can typically be found within the range of $300 to $800 per month.
Private offices for small teams or individuals seeking privacy often start around $500 and can go up to $2000 or more per month, depending on size and location.
Additional services like mail handling, printing, and networking events might be included or offered as add-ons, contributing to overall costs.
| Membership Type | Price Range ($) |
|---|---|
| Daily Pass | $20 - $50 |
| Weekly Pass | $75 - $150 |
| Monthly Membership | $150 - $500 |
| Tiered Memberships | $300 - $1000 |
| Dedicated Desk | $300 - $800 |
| Private Office | $500 - $2000+ |
What else can a coworking space sell?
In addition to regular offerings such as memberships and workspace rentals, coworking spaces can also generate additional revenue streams by:
- Hosting specialized professional workshops or classes
- Providing a platform for freelance consultants or remote professionals
- Assisting individuals with their project plans and goals
- Arranging engaging collaborative challenges or competitions
- Renting out space for private meetings, events, or content creation
- Partnering with local businesses for exclusive networking opportunities
- Delivering virtual training for remote workers unable to attend in person
Who are the customers of a coworking space?
Coworking spaces cater to a variety of customers, ranging from entrepreneurs and freelancers to corporate teams and remote workers.
Which segments?
We've prepared a lot of business plans for this type of project. Here are the common customer segments.
| Customer Segment | Description | Preferences | How to Find Them |
|---|---|---|---|
| Freelancers | Individual professionals working on various projects | Flexible memberships, diverse workspace options, networking events | Online platforms, social media, local business events |
| Startups | Small teams and early-stage companies | Private offices, meeting rooms, amenities, collaborative environment | Networking events, startup communities, local business associations |
| Remote Workers | Employees working remotely for established companies | Reliable high-speed internet, quiet workspaces, ergonomic furniture | Online job boards, LinkedIn, local tech meetups |
| Corporate Teams | Large companies seeking satellite office spaces | Customizable office solutions, branded environments, privacy | Networking with industry events, B2B partnerships, office space listings |
| Entrepreneurs | Individuals developing their own businesses | Mentorship programs, workshops, access to investors | Startup incubators, entrepreneurial events, business accelerators |
How much they spend?
In our detailed analysis of the coworking space industry (when we made the business plan template), we've found that members usually spend between $100 and $400 per month on their arrangements. These costs fluctuate based on several factors, including the location of the space, the type of workspace (e.g., shared, dedicated desk, private office), and any additional amenities they require.
Research indicates that the average duration of a membership at a coworking space often extends from 6 to 24 months. Some professionals and entrepreneurs prefer the flexibility of shorter commitments, while others, particularly established companies or startups with secured funding, find value in longer-term contracts for consistency.
This leads us to the estimated lifetime value of an average coworking space member, which would be from $600 (6x100) to $9,600 (24x400), highlighting a potentially significant return on investment per customer, especially when compared to traditional office spaces.
Given the range and average commitment of members, we can infer that the average revenue a coworking space might expect from each customer would be approximately $4,800. This figure is based on an intermediate monthly cost and a median duration of membership.
(Disclaimer: the numbers provided above are estimates and averages that might not accurately reflect your specific business circumstances. Various factors such as geographical location, local market conditions, and targeted clientele can influence these figures significantly.)
Which type(s) of customer(s) to target?
It's something to have in mind when you're writing the business plan for your coworking space.
The most profitable customers for a coworking space are typically businesses and freelancers in high-growth industries such as technology, consulting, or creative services.
These clients often require flexible workspaces to accommodate their dynamic needs, making them willing to pay a premium for amenities and a professional environment.
To target and attract them, a coworking space should strategically market itself online through social media platforms, industry events, and partnerships. Highlighting flexible lease options, state-of-the-art facilities, and networking opportunities can be key selling points.
To retain these customers, it's crucial to foster a sense of community by organizing networking events, workshops, and providing excellent customer service. Regularly seeking feedback and adapting services based on their evolving needs will contribute to long-term satisfaction and loyalty.
What is the average revenue of a coworking space?
The average monthly revenue for a coworking space generally lies between $5,000 and $150,000. Let's delve deeper into the specifics.
If you're looking to establish your own coworking space and want a detailed financial estimate, you can use our financial plan for a coworking space.
Case 1: A small and basic coworking space in a remote area
Average monthly revenue: $5,000
This kind of coworking space likely offers affordable desk rentals and has the capacity to accommodate no more than 50 members per month.
Due to its remote location, the space might not have high-speed internet or offer additional facilities like conference rooms, private cabins, or cafe services.
Given an estimated desk rental fee of around $100 per member and a total of 50 members, the monthly revenue of this coworking space would total $5,000.
Case 2: A modern coworking space in the city center
Average monthly revenue: $40,000
This coworking space is positioned in the heart of the city and presents a conducive environment for freelancers, startups, and professionals. The space is moderate in size and has provisions for individual desks, private offices, and conference rooms.
Unlike the small coworking space in a remote area, this one offers a superior experience with faster internet, printer access, and even a communal kitchen or cafe. The convenient location and enhanced amenities allow for a higher rental fee.
Additional offerings might include event hosting, workshops, and networking sessions that can be an added source of revenue.
With a conservative estimate of a $200 monthly rental fee and the capacity to accommodate up to 200 members, this coworking space can pull in a monthly revenue of $40,000.
Case 3: A premium and innovative coworking space with advanced facilities
Average monthly revenue: $150,000
This is the crème de la crème of coworking spaces, pushing the boundaries of what's possible in a shared workspace.
Such spaces are furnished with cutting-edge technology, ergonomic furniture, and premium amenities like a rooftop terrace, in-house gym, or even a cinema room. The ambiance is designed to foster creativity, collaboration, and relaxation all under one roof.
This coworking space offers a unique experience to its members, catering to high-end clients, established companies looking for temporary space, or professionals who want nothing but the best.
Beyond just workspace, they might provide services like business mentoring, pitch sessions, exclusive member events, and access to a network of industry leaders.
Given the unparalleled experience and facilities, the rental fees are expectedly higher. Considering a monthly rental fee of $300 per member and a capacity to accommodate 500 members, this space can rack up a monthly revenue of $150,000.
The profitability metrics of a coworking space
What are the expenses of a coworking space?
Operating a coworking space entails expenses for leasing or maintaining office space, providing amenities, marketing, staff salaries, and utilities.
| Category | Examples of Expenses | Average Monthly Cost (Range in $) | Tips to Reduce Expenses |
|---|---|---|---|
| Rent and Utilities | Office space rent, electricity, water, heating/cooling | $1,500 - $10,000+ | 1. Negotiate lease terms with landlords. 2. Consider energy-efficient appliances. 3. Sublease unused space. |
| Office Furniture and Equipment | Desks, chairs, computers, printers, phones | $500 - $5,000+ | 1. Buy second-hand furniture. 2. Lease equipment instead of buying. 3. Invest in durable, long-lasting items. |
| Marketing and Advertising | Online ads, brochures, promotional events | $100 - $1,000+ | 1. Focus on digital marketing. 2. Utilize social media and word-of-mouth referrals. 3. Measure ROI for advertising expenses. |
| Staffing | Salaries, benefits, training | $2,000 - $10,000+ | 1. Consider hiring part-time or remote staff. 2. Offer flexible work arrangements. 3. Cross-train employees for multiple roles. |
| Maintenance and Repairs | Cleaning, repairs, maintenance contracts | $200 - $1,000+ | 1. Schedule regular maintenance to prevent major repairs. 2. Consider a cleaning service contract. 3. DIY minor repairs when possible. |
| Insurance | Property insurance, liability insurance | $100 - $500+ | 1. Shop around for insurance providers. 2. Bundle insurance policies for cost savings. |
| Internet and Technology | High-speed internet, software subscriptions | $100 - $500+ | 1. Compare internet service providers for the best rates. 2. Opt for scalable software solutions. 3. Reevaluate software needs regularly. |
| Miscellaneous | Coffee, snacks, office supplies | $100 - $300+ | 1. Buy office supplies in bulk. 2. Encourage members to bring their own snacks. 3. Consider revenue-sharing with vending services. |
When is a a coworking space profitable?
The breakevenpoint
A coworking space becomes profitable when its total revenue exceeds its total fixed costs.
In simpler terms, it starts making a profit when the money it earns from desk rentals, meeting room bookings, and other services becomes greater than the expenses it incurs for rent, utilities, salaries, and other operating costs.
This means that the coworking space has reached a point where it covers all its fixed expenses and starts generating income; we call this the breakeven point.
Consider an example of a coworking space where the monthly fixed costs typically amount to approximately $25,000.
A rough estimate for the breakeven point of a coworking space would then be around $25,000 (since it's the total fixed cost to cover), or between 100 and 250 members renting a desk or private office space ranging from $100 to $250 monthly.
It's important to note that this indicator can vary significantly depending on factors such as location, size, rental rates, operational costs, and competition. A larger, upscale coworking space in a prime location would obviously have a higher breakeven point than a smaller space in a less expensive area.
Curious about the profitability of your coworking space? Try out our user-friendly financial plan crafted for coworking businesses. Simply input your own assumptions, and it will help you calculate the amount you need to earn in order to run a profitable business.
Biggest threats to profitability
The primary threats to a coworking space's profitability are high expenses, including rent and utilities, which can eat into earnings, as well as inconsistent occupancy rates that result in lost revenue when desks or offices remain unoccupied.
Intense competition within the coworking industry can trigger price wars and reduce profit margins, while economic downturns may decrease demand for flexible office spaces.
Frequent maintenance and upgrades are needed to keep the space appealing to members, and potential legal or regulatory issues like zoning restrictions or lease disputes can create financial challenges.
Additionally, unexpected events such as public health crises, like pandemics, can lead to closures or reduced capacity, impacting membership and revenue.
These threats are often included in the SWOT analysis for a coworking space.
What are the margins of a coworking space?
Gross margins and net margins are financial metrics used to assess the profitability of a coworking space business.
Gross margin refers to the difference between the revenue generated from coworking space memberships, meeting room bookings, and other additional services, and the direct costs associated with providing these services.
Essentially, it's the profit left after deducting the costs directly related to operating the coworking space, such as utilities, staff salaries, and the cost of furnishing and equipping the space.
Net margin, on the other hand, considers all the expenses incurred by the coworking space, including indirect costs like administrative expenses, marketing, rent, and taxes.
Net margin offers a comprehensive view of the coworking space's profitability, accounting for both direct and indirect costs.
Gross margins
Coworking spaces typically have an average gross margin ranging from 50% to 70%.
For instance, if your coworking space earns $20,000 per month, your gross profit would be approximately 60% x $20,000 = $12,000.
Let's illustrate this with an example.
Imagine a coworking space with 20 members, each paying $500 for their monthly membership. The total revenue would be $10,000.
However, the coworking space incurs costs such as utilities, maintenance, and staff salaries.
Assuming these costs total $4,000, the coworking space's gross profit would be $10,000 - $4,000 = $6,000.
In this scenario, the gross margin for the coworking space would be $6,000 / $10,000 = 60%.
Net margins
Coworking spaces generally have an average net margin ranging from 15% to 35%.
In simple terms, if your coworking space generates $20,000 per month, your net profit might be approximately $5,000, which is 25% of the total.
Using the same example for consistency:
Suppose our coworking space has 20 members, each paying $500 for their membership. This results in a total revenue of $10,000.
The direct costs, as explained previously, would amount to $4,000.
Furthermore, the coworking space incurs various indirect costs such as marketing expenses, insurance, accountant fees, taxes, and rent. Let's assume these indirect costs come to $3,500.
After deducting both direct and indirect costs, the coworking space's net profit would be $10,000 - $4,000 - $3,500 = $2,500.
In this case, the net margin for the coworking space would be $2,500 divided by $10,000, resulting in 25%.
As an entrepreneur, it's crucial to understand that net margin offers a more precise indication of the coworking space's profitability since it encompasses all operating expenses.
At the end, how much can you make as a coworking space owner?
Recognize that the net margin is key to understanding the profitability of your coworking space. In essence, it reveals the leftover amount after covering all operating costs.
Your earning potential largely hinges on your business acumen and operational strategies.
Poor coworking space owner
Makes $2,000 per month
If you inaugurate a small coworking space and cut corners, such as choosing a less accessible location, providing minimal amenities, delaying maintenance, and not engaging in marketing, your total revenue might cap at about $10,000.
If you falter in managing your overheads efficiently, it's doubtful your net margin will surpass 20%.
Put simply, your monthly profits could barely touch $2,000 (20% of $10,000).
This represents a rather bleak financial prospect for coworking space owners.
Average coworking space owner
Makes $7,500 per month
Imagine you launch a decent-sized coworking space in a fairly good location, with basic amenities like high-speed internet, coffee stations, and regular networking events.
Your initiatives start bearing fruit. You witness a total revenue surge to around $40,000.
By prudently managing your overheads, you can target a respectable net margin, potentially hovering around 25%.
This would mean monthly earnings of roughly $7,500 (25% of $30,000).
Exceptional coworking space owner
Makes $50,000 per month
You are not just about business; you aim for excellence. You prioritize an attractive location, chic interiors, state-of-the-art facilities, top-tier internet, personal cabins, event spaces, and frequent community-building activities.
Such a premium coworking space can push the revenue envelope to $200,000 or even higher.
Furthermore, by leveraging cost-effective strategies and striking beneficial deals with vendors, you manage to optimize expenses, achieving a net margin close to 40%.
Consequently, for the exemplary coworking space owner, monthly profits could soar to a whopping $50,000 (40% of $125,000).
Your dream workspace can indeed translate into a lucrative venture! Starting with a robust business plan is pivotal for those aspiring to excel in the coworking space industry.