What is the cost of launching a coworking space? What are the key expenses? Is it feasible to do so on a modest budget? Which expenditures are superfluous?
This guide will provide you with essential information to assess how much it really takes to embark on this journey.
And if you need more detailed information please check our business plan for a coworking space and financial plan for a coworking space.
How much does it cost to create a coworking space?
What is the average budget?
On average, starting a coworking space can cost anywhere from $30,000 to $400,000 or more.
Let's break down what impacts this budget the most.
The location of your coworking space significantly influences your expenses. Rent in a prime city center location will be considerably higher than in suburban or less central areas. The cost can vary widely based on the city and specific neighborhood.
Next, the size and quality of the space and its amenities play a crucial role. Basic coworking setups with essential furniture and internet may cost less, while spaces offering high-end furnishings, advanced technology, and additional amenities like conference rooms or lounges can be quite expensive. For example, outfitting a single desk space can range from $500 to $2,000, depending on the level of comfort and technology provided.
Regarding the budget per square meter, on average, you can expect to pay between $300 to $1,000 per sqm for fitting out a coworking space, depending on the quality and complexity of the design.
Renovation and interior design are significant expenses. A minimalistic setup might cost a few thousand dollars, while a bespoke, high-end interior could reach tens of thousands of dollars or more.
Various licenses and permits are required to operate legally. These costs can differ based on location and the specific services offered, ranging from several hundred to several thousand dollars.
Initial marketing efforts, such as branding, website development, and advertising, are also critical. Allocate a few thousand dollars or more for these activities to effectively attract your first members.
Can you open a coworking space with no money?
Starting a coworking space without any funds is challenging, but it's possible to start small. Let's consider the very minimum required to open a coworking space and its potential appearance.
To start at the bare minimum, you might opt for a small, affordable rental space or even sublease part of an existing office. This could save considerable costs on rent.
You could use basic furniture and minimal technology, focusing on creating a functional and comfortable workspace. This might involve an initial investment of around $5,000 to $15,000.
Since it's a small-scale operation, extensive renovations might not be necessary. Simple aesthetic improvements could be made for a few hundred to a couple of thousand dollars.
Reducing amenities to the essentials, like reliable internet and basic printing facilities, can also keep costs down.
For marketing, leveraging social media and networking for word-of-mouth promotion could minimize expenses. Set aside a few hundred dollars for basic branding materials and online advertising.
In this minimal scenario, your initial investment could range from $10,000 to $30,000.
However, be aware that this approach may limit your space's capacity and attractiveness to potential members. As your coworking business grows, reinvesting profits into expanding and enhancing the space and its offerings would be essential.
Finally, if you want to determine your exact starting budget, along with a comprehensive list of expenses customized to your project, you can use the financial plan for a coworking space.
What are the expenses to create a coworking space?
Please note that you can access a detailed breakdown of all these expenses and also customize them for your own project in the financial plan for a coworking space.
The expenses related to the location of your coworking space
When opening a coworking space, location is a key factor for attracting members. Ideal locations are in urban or business districts with high accessibility. Proximity to cafes, restaurants, and other amenities enhances the appeal. It's important to analyze the area's demographics, including the number of freelancers, startups, and small businesses that could be potential clients.
The space should be easily accessible by public transport and have parking facilities. A location with good visibility and signage opportunities is also beneficial.
Consider the layout and size of the space. It should be adaptable to various work setups, including private offices, open areas, and meeting rooms. The ease of modifying the space to fit these needs is also crucial.
If you decide to rent the space for your coworking space
Estimated budget: between 8,000$ and 25,000$
Leasing a space involves initial costs such as security deposits, which could be one to two months' rent. If the monthly rent is $3,000, expect to pay $6,000 to $9,000 initially.
Renovation and setup costs to adapt the space to a coworking environment are significant. Budget for furniture, internet infrastructure, and decor. These costs can vary but budgeting $5,000 to $15,000 is a good starting point.
Reviewing the lease terms is important. Consider consulting a lawyer, which may add $500 to $2,000 in legal fees.
Broker fees, if applicable, are generally covered by the landlord.
If you decide to buy the space for your coworking space
Estimated budget: between 200,000$ and 1,000,000$
The cost to purchase property varies greatly based on location, size, and condition. In a city center, prices can be higher.
Closing costs, such as legal fees and loan fees, typically add 2% to 5% of the purchase price. This could mean additional costs of $4,000 to $50,000.
Renovation and customization costs should be factored in, usually around 10-15% of the purchase price, or $20,000 to $150,000.
Consider professional services for property assessment, and don't forget ongoing expenses like property taxes and insurance, which can be higher than in a rental situation.
Is it better to rent or to buy a physical space when you open a coworking space?
Renting offers more flexibility and lower initial costs, which can be crucial for a new coworking space. It allows for easier relocation or expansion as the business grows. However, it doesn't build equity and might involve rising rents.
Buying a space provides stability, potential tax benefits, and the opportunity to build equity. However, it requires a significant upfront investment and ongoing maintenance responsibilities.
Your decision should be based on your financial capabilities, growth projections, and the dynamics of the local real estate market.
Here is a summary table to help you.
| Aspect | Renting a Coworking Space | Buying a Coworking Space |
|---|---|---|
| Initial Costs | Lower upfront investment | Higher upfront cost |
| Location Flexibility | More flexible location choices | Fixed location |
| Maintenance Responsibility | Landlord typically handles | Owner responsible |
| Quick Startup | Faster to get started | Lengthy acquisition and setup process |
| Customization | Limited control over space design | Full control and customization |
| Stability and Branding | Less stable, potential for relocation | Greater stability, stronger branding |
| Tax Benefits | Possible deductions | Tax advantages |
| Asset for Financing | Limited collateral | Valuable collateral |
| Market Risk | Easier to adapt to market changes | Subject to market fluctuations |
| Long-Term Investment | No long-term equity | Potential for equity buildup |
| Monthly Expenses | Ongoing rent payments | Mortgage payments and expenses |
Equipments, furniture and interior design
Estimated Budget: approximately $50,000 to $120,000
When opening a coworking space, your primary focus should be on creating a comfortable and functional environment. This includes investing in quality furniture and necessary technology.
Quality ergonomic office chairs are crucial for the comfort of your clients. Prices can range from $200 to $500 per chair. Depending on the size of your space, you might need 20 to 50 chairs, leading to an expense of $4,000 to $25,000.
Desks, whether fixed or adjustable, are also essential. A good quality desk can cost between $200 and $1,000. Assuming you need around 20 to 50 desks, the cost could be from $4,000 to $50,000.
Meeting rooms require investment in tables and chairs, with a budget of $2,000 to $10,000, depending on the number of rooms and their size. Additionally, a comfortable lounge area with sofas and coffee tables can cost around $2,000 to $5,000.
Technology is key in a coworking space. High-speed internet with a reliable Wi-Fi system is non-negotiable, costing approximately $2,000 to $5,000 for setup and first-year service. Printers and scanners are also necessary, with costs ranging from $500 to $2,000 depending on their capabilities.
Consider also the investment in a security system, which can range from $1,000 to $5,000, including cameras and access control systems.
For coffee and snack services, a small kitchen or pantry area equipped with a coffee machine, microwave, and refrigerator can add $1,000 to $4,000 to your budget.
In prioritizing your budget, focus on ergonomic chairs and reliable desks, as these directly impact client satisfaction. Next, ensure good internet connectivity and basic office technology.
You can initially opt for mid-range options in lounge furniture and kitchen amenities. However, avoid the cheapest options as they may lead to higher maintenance costs.
Remember, starting a coworking space is about creating a balance between a welcoming environment and functional workspace. Initially invest in essential, high-quality items, and then gradually upgrade or add amenities as your business grows.
| Category | Estimated Cost |
| Quality Ergonomic Office Chairs | $4,000 to $25,000 |
| Desks | $4,000 to $50,000 |
| Meeting Rooms (Tables and Chairs) | $2,000 to $10,000 |
| Lounge Area (Sofas and Coffee Tables) | $2,000 to $5,000 |
| High-Speed Internet and Wi-Fi | $2,000 to $5,000 |
| Printers and Scanners | $500 to $2,000 |
| Security System | $1,000 to $5,000 |
| Coffee and Snack Services (Kitchen/Pantry) | $1,000 to $4,000 |
Marketing, Branding and Communication
Estimated Budget: $8,000 to $15,000 for the first months of operation
In the dynamic world of coworking spaces, branding, marketing, and communication are vital components for standing out in a competitive market.
Branding in a coworking space is about creating an atmosphere that reflects your vision and values. It's more than just a logo or website design; it's about the vibe that members feel when they walk in, the layout of the workspace, and the community culture you foster. Your branding could aim for a high-tech, innovative aura or a relaxed, creative environment, impacting everything from the furniture design to the events you host.
Marketing for a coworking space is your beacon to attract freelancers, startups, and businesses. It's not enough to have a great space; you need to actively promote it. A strong online presence is crucial. Showcase your amenities, community events, and member testimonials through targeted digital campaigns, ensuring your coworking space pops up in searches for "best coworking space in [your city]."
However, broad-reaching advertising campaigns are less effective. Focus on local networking events, partnerships with local businesses, and online platforms where your potential members are most active.
Communication in a coworking space is about building relationships. It's the way you interact with members, whether through a community app, regular newsletters, or face-to-face during events and workshops. Effective communication fosters a sense of belonging and collaboration, turning your space into a hub for networking and growth.
When it comes to your marketing budget for a coworking space, it typically ranges from 3% to 12% of your revenue. Starting at the lower end and adjusting based on response and growth is advisable.
Your budget should prioritize areas like a user-friendly website, engaging social media content, and community-building events. As you grow, you may increase spending on digital marketing or community initiatives based on what drives the most engagement and membership sign-ups.
Staffing and Management
Estimated Budget: $15,000 - $25,000 for the first month
When opening a coworking space, the budget for staffing and management is a critical component that varies based on the size of your space, the range of services offered, and operational hours.
Starting with the essentials:
Operating a coworking space solo can be feasible, but it's a demanding task. It requires continuous attention to facility management, member services, and administrative duties. Typically, it's advisable to hire a team to ensure efficient operations and a healthy work-life balance.
Key positions in a coworking space include a community manager, who oversees daily operations and member interactions, and a facilities manager, responsible for maintaining the physical space. Additionally, a front desk staff for greeting and assisting members is essential from day one for a professional and welcoming environment.
As your coworking space expands, consider employing specialized roles such as event coordinators, IT support, and marketing professionals. These roles become increasingly important as you establish your brand and expand your services.
Staff should be compensated from the beginning of their employment to foster a motivated and stable workforce. Postponing payment can lead to dissatisfaction and high staff turnover.
Beyond salaries, factor in additional costs like taxes, insurance, and benefits, which can increase your staffing expenses by 25-35% above the base salaries.
Training is vital in a coworking space for ensuring high-quality member services and efficient management of the facility. Initially, allocate funds for training in customer service, community engagement, and facility management. This investment is crucial for the smooth running of your coworking space and can range from several hundred to a few thousand dollars, depending on the extent of the training required.
| Job Position | Average Salary Range (USD) |
|---|---|
| Community Manager | $40,000 - $60,000 |
| Membership Sales Associate | $30,000 - $50,000 |
| Facilities Coordinator | $35,000 - $55,000 |
| Event Coordinator | $35,000 - $55,000 |
| IT Support Specialist | $45,000 - $75,000 |
| Marketing Manager | $50,000 - $80,000 |
| Office Space Designer | $55,000 - $85,000 |
Please note that you can access a detailed breakdown of all these expenses and also customize them for your own project in the financial plan for a coworking space.
Professional Services
Beginning with a lawyer, for a coworking space, it's essential to understand the intricacies of commercial real estate and tenant law.
A lawyer will guide you through zoning laws and property use agreements, crucial for coworking spaces that often repurpose buildings for multiple users. They'll also help in drafting membership agreements and handling intellectual property concerns, typical in shared working environments. The cost for legal services in this field may range from $3,000 to $7,000 initially, depending on complexity and location.
Consultants for a coworking space are invaluable, especially in crafting a unique community atmosphere.
They can assist in designing efficient, collaborative spaces, offering insights on the latest trends in workplace design, and advising on technology integrations for seamless operations. Their expertise in community building and marketing strategies can also be pivotal. Expect to pay between $100 to $300 per hour for a consultant experienced in coworking setups.
Bank services for a coworking space are critical for managing a variety of financial transactions.
This includes setting up merchant services for membership fees and booking systems, as well as managing operational expenses. You'll also likely need loans or lines of credit for initial setup or expansion. The costs will vary based on the bank and the extent of services used.
Insurance for a coworking space must cover a broader range of liabilities than typical businesses.
This includes general liability, property insurance, and potentially, coverage for equipment and technology used by members. Given the public nature of the space and the variety of activities, insurance costs can range from $1,500 to $6,000 annually, depending on the size and scope of the space.
Finally, for a coworking space, regular investments in technology and facility upgrades are crucial.
Unlike a one-time setup, maintaining cutting-edge technology and a modern, appealing environment is necessary for attracting and retaining members. This includes high-speed internet, printing services, and ergonomic furniture. The costs for these upgrades will vary but expect them to be a significant, ongoing part of your budget.
| Service | Description | Cost Estimate |
|---|---|---|
| Lawyer | Handles zoning laws, property use agreements, membership agreements, and intellectual property concerns. | $3,000 to $7,000 initially |
| Consultants | Assists in designing collaborative spaces, community building, and advising on technology and marketing strategies. | $100 to $300 per hour |
| Bank Services | Manages financial transactions, merchant services for membership fees, operational expenses, loans, and credit lines. | Varies |
| Insurance | Covers general liability, property, equipment, and technology used by members. | $1,500 to $6,000 annually |
| Technology and Facility Upgrades | Maintains cutting-edge technology and modern environment with high-speed internet, printing services, and ergonomic furniture. | Varies (Ongoing) |
Ongoing Emergency Funds
Estimated Budget: $20,000 to $100,000
When you're opening a coworking space, establishing an emergency fund is absolutely crucial.
Think of it as your safety net when navigating the ever-evolving landscape of coworking; you hope you won't need it, but it's essential for your peace of mind and the security of your coworking venture.
The amount you should allocate to your emergency fund can vary, but a general guideline is to have enough to cover at least 3 to 6 months of your operating expenses. In the context of a coworking space, this typically ranges from $20,000 to $100,000, depending on the scale of your operations and location.
Remember, these figures can fluctuate based on factors like rent for the space, utilities, staff salaries, and maintenance costs.
One of the primary reasons for having this fund is the unpredictability of cash flow in the coworking industry. For instance, you might encounter fluctuations in occupancy rates or face unexpected repair costs for office furnishings and equipment, which can be quite costly. Without a financial cushion, these situations can significantly impact your cash flow.
To mitigate these potential challenges, it's not enough to rely solely on your emergency fund. Efficient financial management, such as budgeting, forecasting, and regular performance evaluations, is crucial.
Additionally, diversify your revenue streams by offering a range of membership plans and services. This can help stabilize your income and reduce vulnerability to changes in the coworking market.
Building strong relationships with your members and partners is equally important. Happy and satisfied members are more likely to renew their memberships and recommend your coworking space to others, ensuring a stable source of income and growth.
Furthermore, stay updated on industry trends and adapt to changes swiftly. A coworking space that remains flexible and responsive to evolving workspace needs is better equipped to thrive in a competitive market.
In conclusion, while opening a coworking space can be a promising business venture, it's essential to be prepared for unforeseen circumstances. An emergency fund, efficient financial management, diversified revenue streams, and excellent member relationships are key elements of financial security in the coworking industry.
Franchise Fees
Estimated Budget: $40,000 to $100,000
Only if you decide to join a coworking space franchise!
When considering the establishment of a coworking space, franchise fees can constitute a substantial financial consideration. On average, you might anticipate paying between $40,000 to $100,000 in franchise fees for a coworking space. Nevertheless, these figures may vary based on factors like the brand's reputation, market position, and the extent of support they provide.
The franchise fee generally represents a one-time payment made to the franchisor. In return, you gain the rights to operate your coworking space under their established brand and gain access to their business model, training programs, and support systems. It's worth noting that the franchise fee is just one facet of the financial commitment; ongoing expenses such as royalty fees, marketing contributions, and operational costs also come into play.
Coworking space franchises may employ different fee structures. Some may have higher initial franchise fees but lower ongoing expenses, while others may adopt the opposite approach.
Regrettably, negotiating the franchise fee is often challenging, as these fees are typically standardized across all franchisees within a specific coworking space brand.
However, there may be room for negotiation in other aspects of the franchise agreement, such as contract duration or specific terms and conditions. Collaborating with a franchise attorney or advisor can prove valuable in comprehending and potentially negotiating these terms.
As for the duration required to recoup your investment and achieve profitability, it can vary significantly. Factors like the location of your coworking space, the brand's reception in your area, your business expertise, and the overall market conditions all influence this timeline. Typically, it could take anywhere from a few years to several years to realize a profitable return on your investment when operating a coworking space franchise.
Please note that you can access a detailed breakdown of all these expenses and also customize them for your own project in the financial plan for a coworking space.
Which expenses can be removed from the budget of a coworking space?
Managing your expenses wisely is key to the long-term success of your coworking space.
There are certain costs that can be deemed unnecessary, others that are often overspent on, and some expenses that can be delayed until your coworking space is more established.
First, let's address unnecessary costs.
A common mistake in establishing coworking spaces is overspending on lavish interior designs and high-end furniture from the outset. While a professional and inviting environment is important, the primary draw for your clients will be the functionality and community you provide. Start with a practical and comfortable setup, focusing on reliable internet, basic office amenities, and a welcoming atmosphere.
In terms of marketing, traditional expensive advertising methods can be avoided. Opt instead for cost-effective digital marketing strategies. Use social media platforms, build a functional website, and engage in community networking events. These methods are often more affordable and can be just as effective as high-cost advertising.
Now, let's consider the areas where coworking spaces tend to overspend.
Purchasing excessive technology and office equipment is a common pitfall. It’s crucial to strike a balance between providing sufficient resources and being economical. Start with essential equipment and scale up as your client base grows. This way, you avoid the pitfalls of over-investing in technology that may quickly become outdated or unnecessary.
Regarding staffing, it's wise to start lean. Overstaffing in the early stages can lead to unnecessarily high labor costs. Begin with a core team that can handle multiple roles and hire more staff as the demand increases.
As for delaying expenses, consider holding off on major expansions or high-end upgrades until your coworking space is financially stable. Expanding too quickly can be a financial burden. Focus on growing your client base and ensuring consistent revenue before undertaking significant expansions.
Also, while it might be tempting to invest in specialized amenities like high-tech conference rooms or luxury lounges, these can be deferred. Start with basic but functional amenities and consider adding more luxurious offerings as your business grows and you better understand your clients' needs.
By managing these expenses wisely, you can ensure a more sustainable growth path for your coworking space.
Examples of startup budgets for coworking spaces
To help you visualize better, let's break down the budget for three different types of coworking spaces: a small space in a rural area with basic amenities, a regular urban coworking space with additional services, and a high-end, spacious coworking space with premium facilities.
Small Coworking Space in a Rural Area with Basic Amenities
Total Budget Estimate: $20,000 - $40,000
| Category | Budget Allocation | Example of Expenses |
|---|---|---|
| Equipment and Furniture (Basic) | $5,000 - $10,000 | Desks, chairs, basic office equipment, second-hand computers |
| Lease and Renovation | $3,000 - $7,000 | Lease deposit, minor renovations and repairs |
| Technology and Connectivity | $2,000 - $4,000 | Internet setup, basic networking equipment |
| Permits and Licenses | $500 - $1,500 | Business license, insurance |
| Marketing and Advertising | $1,000 - $3,000 | Local ads, flyers, business cards |
| Miscellaneous/Contingency | $3,000 - $5,000 | Unforeseen expenses, utility setup, office supplies |
Regular Urban Coworking Space with Additional Services
Total Budget Estimate: $50,000 - $100,000
| Category | Budget Allocation | Example of Expenses |
|---|---|---|
| Equipment and Furniture (New and Efficient) | $20,000 - $40,000 | Modern desks, ergonomic chairs, printers, scanners |
| Lease and Renovation | $15,000 - $25,000 | Urban location lease, interior design, comfortable furniture |
| Technology and Connectivity | $5,000 - $10,000 | High-speed internet, advanced networking, security systems |
| Permits and Licenses | $2,000 - $4,000 | Comprehensive insurance, business licenses |
| Marketing and Branding | $5,000 - $10,000 | Website, social media campaigns, branding materials |
| Miscellaneous/Contingency | $8,000 - $16,000 | Insurance, utilities, emergency funds |
High-End, Spacious Coworking Space with Premium Facilities
Total Budget Estimate: $150,000 - $300,000
| Category | Budget Allocation | Example of Expenses |
|---|---|---|
| Equipment and Furniture (Premium) | $50,000 - $100,000 | High-end ergonomic furniture, state-of-the-art office equipment |
| Lease and Luxury Renovation | $40,000 - $80,000 | Premium location, high-end interior design, custom furniture |
| Technology and Connectivity | $20,000 - $40,000 | Top-tier internet services, advanced security systems, smart technology |
| Permits, Licenses, and Insurance | $10,000 - $20,000 | Extensive insurance coverage, various permits |
| Marketing and High-End Branding | $20,000 - $40,000 | Professional marketing agency, high-end branding, exclusive events |
| Miscellaneous/Contingency | $30,000 - $60,000 | Contingency fund for unforeseen expenses, luxury amenities |
How to secure enough funding to create a coworking space?
Securing funding for a coworking space often involves a combination of personal savings, bank loans, and contributions from family and friends. Unlike high-growth tech startups, coworking spaces may not typically attract venture capitalists, as they are more focused on scalable, tech-driven businesses.
Grants could be an option, but they are generally more accessible in sectors like technology, health, or education, and less so for a service-based business like a coworking space.
When approaching a bank or investor for funding, presenting a comprehensive business plan is essential. This plan should detail your financial projections, market analysis, unique selling points (what makes your coworking space stand out), and an operational strategy.
Showcasing an in-depth understanding of your target market and a solid path to profitability is crucial. Banks and investors are interested in seeing a clear picture of projected revenues, expenses, and cash flow. They also value evidence of your commitment and capability to run the business, which can be demonstrated through your experience or by partnering with individuals who have expertise in managing such spaces.
In terms of personal investment, it's often expected that you contribute around 20-30% of the total startup budget. This demonstrates your commitment to the project. However, this is not a strict rule. If you can effectively show the viability of your business and your ability to repay a loan, you might secure funding without significant personal financial input.
Timing is also key in securing funds. Ideally, you should have your financing in place about 6 months before opening. This period allows for setting up the space, acquiring necessary equipment, hiring staff, and managing other pre-launch activities. It also provides a buffer for unexpected challenges.
Expecting to be cash flow positive from the first month is optimistic. Most new businesses, including coworking spaces, take time to become profitable. Hence, it's wise to allocate about 20-25% of your total startup budget as working capital. This reserve will help manage cash flow during the initial months until the business becomes self-sustaining.
You might also want to read our dedicated article related to the profitability of a coworking space.
How to use the financial plan for your coworking space?
Many aspiring coworking space owners face the challenge of presenting their business ideas to investors in a clear and convincing manner. Often, their presentations are muddled and their financial documents lack professionalism.
To turn your vision of launching a successful coworking space into reality, gaining the trust and confidence of potential investors or lenders is key. A well-structured approach is essential.
This is where a solid business and financial plan comes into play.
We have crafted a user-friendly financial plan, designed specifically for coworking space business models. This plan includes detailed financial projections for a three-year period.
Our plan covers all critical financial aspects, including income statement, cash flow statement, break-even analysis, and a provisional balance sheet, among others. It features pre-filled data that outlines various expenses typical for coworking spaces, which you can adjust to fit your specific needs.
This financial plan is not only suitable for loan applications but also ideal for beginners. It requires no prior financial expertise. The process is fully automated – no need to calculate anything or tweak any cells. You just input your figures and choose your options. Our goal is to make it as straightforward as possible, even for those who are new to financial planning or not well-versed in software like Excel.
If you face any hurdles or have queries, our dedicated team is always on standby to provide assistance and guidance at no extra cost.
The content provided here is for informational purposes only and does not imply endorsement. While we strive for accuracy, we do not guarantee the completeness or reliability of the information, including text, images, links, or other elements in this material. Following the advice or strategies presented here does not assure specific outcomes. For guidance tailored to your individual circumstances, it is recommended to consult with a professional, such as a lawyer, accountant, or business advisor.