Flexible office spaces, including coworking spaces, have a huge place in the future of work — but at what cost?

This article will help you assess whether your coworking space business model is set up to be profitable. We’ll look at some common pitfalls, why some coworking space owners struggle, the operating costs to pay close attention to as you prepare to open your doors, and some revenue-boosting tips you’ll need to start a successful coworking space.

Ultimately, we’ll answer the question, “Are coworking spaces profitable?” — and when they are, under what circumstances?


Quick Answer: Coworking spaces can be profitable, particularly in urban areas with high demand for flexible work environments. Profitability depends on factors such as location, occupancy rates, membership pricing, and operational efficiency. OfficeRnD Flex can help you keep on top of contract renewals, secure meeting room bookings, and make data-driven decisions as you launch your coworking space business.


How Much Profit Does a Coworking Space Generate?

A coworking space’s profit margin depends on many factors, including the space’s size, overhead costs, location, and demand. Generally speaking, the larger the space and the more loyal members you can attract, the larger your profits will be.

But on average, how profitable are coworking spaces? According to data cited by Sharpsheets.io, the average coworking space provider earns $742K in gross revenue per year, with a ~30% operating profit margin. This means that if your business were to bring in revenue in this ballpark, you could have around $222K in profit.

But to get there, you need to set your space up for success. Carefully monitor and control your costs while also providing a superior service from the start to attract high volumes of loyal customers. This makes your coworking space a worthwhile investment.

an illustration of a woman doing calculation work

What Are the Typical Expenses of a Coworking Space?

To start a successful coworking space, you will need the right team members, utilities, logistics, equipment, and marketing — in addition to the space itself.

But how much of your overall budget should you expect to spend on each aspect?

The precise dollar amounts are hard to estimate; they depend on a lot of factors, including how large your coworking space will be, what staffing levels it will require, and how much investment you’ll need to get it worker-ready.

Your location could dramatically impact the amount you’ll pay on rent for your space. Plus, the level of the service you’re looking to provide — whether simple or more luxurious — will inform your spending on furniture and other supplies.

As you consider your major overheads, it’s helpful to consider the proportion of your overall budget that you should expect to spend on each operational cost. We’ve put together an estimate breakdown of the difference costs associated with starting a coworking space that you can use as a rule of thumb as you get started with your own calculations:

coworking space expenses

This isn’t an exhaustive list but gives you an idea of the range of expenses that you’re likely to be spending on, at least to start.

How Much Are the Startup Costs of a Coworking Space?

Once you get the keys to your dream space, you’ll need to spend some money on the necessities before you can welcome your first clients to their new collaborative environment.

Here are some of the typical startup operating costs you’ll need to factor in:

Office Equipment and Furniture

The cost of furniture and equipment can vary wildly depending on whether you’re purchasing new, high-end items or working with refurbished technology and lightly used desks and chairs.

Building Refurbishment

Is your space good to go, or does it need a little TLC before it’s ready for users? Perhaps new carpet, or an upgrade for the kitchen areas? What about amenities?

To accurately calculate your coworking space startup costs, you’ll need to factor in the structural and cosmetic attention the space needs ahead of your grand opening.

Connectivity Setup

Don’t forget to include this cost: your coworking space’s all-important connection to the internet! Will new wiring or outlets be needed, and are meeting rooms set up with the AV equipment your clients will need?

License

What kind of business license(s) do you need to operate in your state and city, and what are the associated fees?

Insurance

Whether you’re paying monthly or annual premiums, protecting your new business is vital and should be factored into your launch costs.

Professional liability insurance and commercial property insurance are examples of insurance types that might be relevant, and you’ll need to carefully research to ascertain which insurance types you’ll need.

Legal Fees

There might be legal costs associated with getting the paperwork for your new space in order. Whether these costs are connected with getting your lease agreement ready or reviewing the insurance coverage necessary, be sure to include them in your total startup cost tally.

Software

With so many different start-up costs to think about, you’ll no doubt be anxious to start making money from your new business—and the right software will help.

Getting your coworking space business off to a strong start means keeping all memberships, fees, and bookings organized. OfficeRnD Flex already helps thousands of flex space owners keep members happy and automate the rest. It’s acustomizable coworking space management platform — and with the Flex Startup Program, you can have a 20% annual discount.

 

How Do Coworking Spaces Make Money?

Now that you have your startup costs in order, let’s look at the different ways your coworking space can start making money:

Membership Fees

For most coworking spaces, the bulk of the revenue comes from a subscription model for your core offering of dedicated desk space.

You could opt to charge your customers weekly, monthly, or annually. But don’t forget to offer a daily option for those trying your space out for the first time, as well as flexible add-ons for loyal customers.

Meeting Rooms

Your meeting and conference rooms have high earning potential for your business, so make sure you optimize them for usage. Use a management software solution such as OfficeRnD Flex to manage coworking room bookings.

Additional Services

Consider providing lockers or bike racks for a small additional charge. An additional revenue stream could be printing rooms and mailing services.

You can also consider hosting networking events for your local professional community. In addition to bringing in more revenue, this draws more flexible workers into your space for the first time.

Why Do Some Coworking Spaces Struggle to Generate Revenue?

Here are some of the top pitfalls coworking spaces on the road to generating high revenue face:

Poor Marketing

A brand-new coworking space will only succeed if the right people know about it. As you plan the launch of your space, create a marketing plan that identifies the core channels to reach your target audience, along with a communications strategy for onboarding them as coworking space members.

Here’s a useful guide on some tried-and-true marketing strategies for coworking spaces.

Issues Retaining Clients

If clients struggle with booking the spaces they want when they want them, they might lose faith in them. The best way to avoid this is to offer a streamlined experience for members from the start.

Mastering hospitality can really elevate your coworking space.

High Rent Costs

Sky-high rent continues to be an issue for many coworking spaces. DeskMag’s 2023 survey found that spaces with high rental expenses were more likely to struggle to be profitable than those with lower costs.

You’ll need to make the most out of every single square foot. This makes a management platform for tracking space usage like OfficeRnD Flex, particularly helpful.

contract agreement

3 Tips for Generating Coworking Space Revenue

To become a highly profitable coworking space within your first few years in business, you’ll need to offer a consistently high standard of service. Here are some factors to consider as you work to boost your coworking space revenue and set yourself apart:

Keep on Top of Contract Renewals

Don’t leave revenue on the table by failing to charge your clients on time. A coworking solution such as OfficeRnD Flex can help you easily keep track of your billing and invoicing. Plus, with reports on your membership churn and average length of stay, you can quickly identify where you need to improve.

Look for Upselling Opportunities

You might be able to increase revenue from an existing member base by offering packages, such as bulk meeting room bookings. Use a management platform to make sure you always have a real-time view of your bookings and cancellations, and consider offering last-minute promotions to sell space that is going unused.

Make Data-Led Decisions

Once you know what’s working well, you can hone your strategy to gain better coworking space profits. Filter business dashboards with the OfficeRnD Data Hub, drilling down to the data you need to scale faster. These pre-built dashboards show your most important KPIs at a glance, so even when you’re juggling multiple tasks at once, it’s easy to view and digest business-critical data.

When Does a Coworking Space Typically Break Even?

When you ask yourself, “Are coworking spaces profitable?” you’re no doubt wondering how long it will take you to break even or start turning a profit.

There’s no simple answer to this — it depends on many factors, including your overhead costs and location. The DeskMag survey mentioned above found that just 11% of coworking space locations were profitable within the first year. So, the chances are you will need to be patient to see returns.

For businesses that can weather this rocky start, though, the prospects are good. The same survey found that 68% of coworking space locations that are four to six years old are profitable.

In the long run, you’ll reap the rewards of setting up your business the right way from the beginning. So, take care to offer your customers an intuitive way to book and pay for their spaces to begin fostering loyalty from day one.

when are coworking spaces profitable statistifc

What Is a Coworking Space’s ROI?

To calculate your coworking space’s return on investment (ROI), you’ll need to compare your initial investment with the ongoing revenue stream and profits you expect.

We estimate it takes around $500K of initial investment to get a coworking space up and running. In this scenario, let’s imagine this coworking space operates at a loss of around $50k in year one, breaks even in year two, makes a small profit of $50k in year three, rises to $150k in year four, supercharges to $222K in year five, and then creeps up a little more to $250K in year six.

$622K – the $500K startup cost = $122K. This is the total ROI six years in — and ideally, it will keep rising!

So… Are Coworking Spaces Profitable, and Is It Worth Starting One?

Having worked with thousands of coworking space owners, we can safely say that, yes, coworking spaces are a profitable business. ccording to data cited by Forbes, 98% of workers want to work remotely at least some of the time: that’s a huge incentive for developing a more flexible future for in-person work.

As companies streamline their operations and turn to hybrid, they’ll need meeting spaces. Plus, your neighborhood freelancers may be looking for dedicated desk space locally. The way we work is shifting — and your coworking space can be a big part of that!

officernd flex

Supercharge Your Coworking Space Profit Plan With OfficeRnD Flex

OfficeRnD Flex is perfect if you’re setting up a coworking space business from scratch. With it, you can:

  • Create a strong visual identity for your coworking space. Our white-label solution lets you create a management platform tailored to your business and needs.
  • Keep track of meeting room bookings in your coworking space by setting custom policies and cancellation rules that will allow you to stay profitable and make the most of your space.
  • Manage your customer relationships in one intuitive place, from new leads to recurring revenue. Our filtering and reporting capabilities help you stay on top of opportunities and focus on growing your pipeline.
  • Automate billing and payments, focus on growing your business and keep members happy.

Are you ready to take the coworking market by storm? We can’t wait to help you make your new coworking space a success. Contact us today to book a live demo of OfficeRnD Flex.

FAQ

Can you Make Money Owning a Coworking Space?

Yes, owning a coworking space can be profitable. Success depends on several factors such as location, market demand, pricing strategy, and the quality of amenities offered. Effective management that maximizes space utilization and provides value-added services like networking events, workshops, and flexible membership options can attract a steady stream of members. By creating a desirable environment that meets the needs of freelancers, startups, and remote workers, owners can see a good return on investment.

How Successful are Coworking Spaces?

Coworking spaces have proven to be quite successful, particularly in urban areas and among freelancers, startups, and increasingly, larger corporations. Their success is driven by the growing demand for flexible, cost-effective office solutions and the added value of community and networking opportunities they provide. Effective coworking spaces adapt to the needs of their members, offering various amenities, flexible lease terms, and fostering a collaborative environment. As the workforce becomes more mobile, the popularity and success of coworking spaces continue to rise.

What is the Revenue Model of a Coworking Space?

The revenue model of a coworking space primarily revolves around membership fees, which can vary based on the type of access and amenities provided. Members can choose from several tiers, such as hot desks, dedicated desks, private offices, or day passes. Additional revenue streams include renting out meeting rooms, hosting events, offering virtual office services, and providing ancillary services like printing or food and beverage sales. This multi-faceted approach allows coworking spaces to maximize their earning potential while catering to diverse client needs.

Why is WeWork not Profitable?

WeWork has faced challenges in achieving profitability due to several factors. High operational costs associated with leasing and maintaining large properties in prime locations significantly impact margins. Additionally, rapid expansion led to substantial spending without sufficient time to establish stable revenue streams from new locations. The mismatch between long-term lease liabilities and the short-term revenue from memberships also poses financial risks, especially in fluctuating market conditions. These elements combined have made it difficult for WeWork to sustain a profitable model.

Miro Miroslavov
CEO and Co-founder of OfficeRnD
Miro Miroslavov is a software engineer turned into a tech entrepreneur. In 2015 he co-founded OfficeRnD - a leading flex space and hybrid work management platform. As a CEO at OfficeRnD, he grew the company from inception to a leading software vendor that serves thousands of customers worldwide. He is a big fan of flexible working and is on a mission to "Making Flexible Working the Way of Working".