Coworking spaces have revolutionized how we use office space, offering flexibility, community, and a break from traditional office settings.

Like any other business solution, though, these spaces come with challenges. While some thrive, others flounder.

If you run a coworking space or are considering entering the industry, it’s important to understand the difficulties that can arise so you can prepare for them.

In this post, we address common reasons why coworking spaces fail so you can implement strategies to manage them, keeping your clients happy and your business healthy.


Quick Summary:

  • Coworking spaces often fail due to poor location choices, inadequate market research, and lack of a unique value proposition, leading to underutilization and financial struggles.
  • Coworking spaces should focus on thorough market research, effective resource management, community building, and maintaining financial discipline for long-term success to avoid these pitfalls.

10 Common Reasons Why Coworking Spaces Fail

There are many different reasons why coworking spaces fail. Let’s look at ten of the most common:

Poor Location and Accessibility

High occupancy rates are crucial for maintaining a vibrant and sustainable coworking community. Unfortunately, an inconvenient location can undermine this by deterring potential clients.

A location that’s difficult to reach or far from public transportation hubs can negatively affect membership growth and retention. A coworking space in a remote area without adequate public transit options or parking facilities becomes less attractive to prospective members who prioritize easy and quick commutes.

Additionally, a poorly chosen location can impact the space’s visibility and accessibility to local businesses, which are often important factors coworking space members consider when choosing where to work.

Insufficient Market Research

Lack of thorough market research is often one of the reasons coworking spaces fail. It can lead to significant misunderstandings about the target audience’s needs and preferences, resulting in inadequate services and facilities.

After all, defining a clear customer profile is among the most important factors for building a thriving coworking business.

an illustration of a man looking at a pc

If you don’t research your business model, you may overlook essential amenities, technological requirements, or community-building activities. This oversight can lead to dissatisfaction among existing members and deter potential new members.

Moreover, inadequate market research can result in poor pricing strategies that don’t reflect the market’s willingness to pay, leading to financial difficulty.

For example, if your target audience is nomads or entrepreneurs who like to work at night, you have to provide at least some sort of 24/7 access to your space.

And if your target audience are people interested in sustainability, you have to work to make your coworking space a green one.

Inadequate Community-Building

Innovative companies understand the importance of community. A strong, vibrant community is essential for creating an environment where members feel supported and connected, as this enhances their work experience and makes them more loyal to the coworking space.

When members feel isolated, they are less likely to participate in collaborative activities or network with other members, reducing the overall value they derive from the space. This lack of engagement can lead to higher churn, as members may seek out other coworking spaces or work environments where they feel a greater sense of belonging and community.

A strong community is also a key driver of member retention. Coworking spaces that successfully build and maintain this environment are more likely to foster long-term relationships with their members, creating a loyal customer base. With this sense of community, coworking spaces may be able to maintain membership levels and achieve financial stability, ultimately jeopardizing their overall success.

Lack of a Unique Value Proposition

Not differentiating your coworking space from competitors can significantly hinder your ability to attract prospective users looking for unique benefits or services. In the increasingly competitive coworking market, where many coworking spaces offer similar amenities, clear and compelling value propositions are vital.

Your coworking space might differentiate itself by offering cutting-edge technology, flexible membership plans, or a niche focus (such as tech startups or creative professionals). Without a strong UVP, potential members may overlook your coworking space and opt to work with one of your competitors instead. To create a UVP, you need to perfectly know your ideal custom profile. Here’s a list of some of the industries that use coworking spaces the most.

One way to offer value is by creating a digital workplace experience members will love. You can easily do so with an industry-leading coworking space management solution such as OfficeRnD Flex.

Ineffective Resource Management

Ineffective management of resources such as space, finances, and staff can lead to significant operational inefficiencies and increased coworking space costs. Properly allocating and managing your resources is essential if you want to maintain a smooth and profitable operation.

Financial mismanagement can lead to cash flow issues, making it challenging to cover operational costs and invest in necessary improvements. High overhead costs, if not carefully controlled, can quickly erode profitability, putting the financial health of your coworking space at risk.

Additionally, poor staff management (insufficient training, inadequate staffing levels, etc.) can reduce the quality of service you provide to your members, leading to a higher churn rate.

Overcrowding or Underutilization

Overcrowded coworking spaces are uncomfortable and tend to cause dissatisfaction among members, who may struggle to find available workstations, meeting rooms, or quiet areas. This can result in a noisy, chaotic environment that hinders productivity and reduces the overall appeal of the space.

On the other hand, underutilized spaces lead to wasted resources and missed revenue opportunities. Empty desks and unused meeting rooms indicate that a coworking space is not maximizing its potential income.

Balancing occupancy levels is crucial for maintaining a healthy and sustainable coworking environment. Ensure that your space is neither too crowded nor too empty to provide a comfortable and productive atmosphere for your members while optimizing revenue for yourself.

Flexible seating arrangements, dynamic pricing, and regular monitoring of usage patterns can help you get this balance right.

The best way to manage and optimize your space is by using advanced analytics software.

people analyzing

Inconsistent Customer Experiences

Inconsistent experiences — such as unreliable internet, fluctuating cleanliness levels, or erratic service — can frustrate members and reduce their trust in your coworking space.

Consistency in service quality is essential for ensuring member satisfaction and retention. When members can rely on a consistently high level of service, they are more likely to remain loyal and satisfied, which fosters positive word-of-mouth and helps attract new members.

A stable and content member base is crucial for your coworking space’s long-term success, as it gives you a steady revenue stream and contributes to a vibrant community atmosphere.

Financial Mismanagement and High Overhead

Ineffective financial management and high operational costs can deplete resources quickly, making it difficult to sustain the business. According to a study by vcita, “economic elements” of their operations were the biggest worry for 67% of small and medium business owners heading into 2024.

High overhead expenses and poor financial planning can lead to cash flow problems, making it challenging to cover basic expenses and invest in necessary improvements, ultimately risking the space’s closure.

The coworking giant Wework went into bankruptcy mostly because of misjudging expensive leases.

finances

Ignoring Member Feedback

Failing to listen to and act on member feedback can lead to unresolved issues and unmet needs, significantly reducing member satisfaction and loyalty.

Ignoring feedback can result in member churn, as dissatisfied members leave for competitors who offer a better experience.

This exodus can generate negative reviews and damage the coworking space’s reputation, making it more challenging to attract and retain new members. Word-of-mouth is powerful in the coworking industry, and negative experiences shared by former members can deter potential new clients.

You can keep track of your members’ satisfaction rate by using a KPI such as the Net Promoter Score.

member feedback

Failure to Adapt to Market Changes

The COVID-19 pandemic illustrated just how important it is for businesses to be adaptable when it comes to shifting circumstances. In fact, according to CB Insights, 33% of the startups that failed in 2022 (the third year of the pandemic) named COVID-19 as the primary reason they couldn’t keep going.

The pandemic is behind us now, but change continues to be a certainty in business. If you want to keep your coworking business healthy, you need to stay updated on major market movements. Failing to respond to evolving market trends and member needs can make your coworking space outdated and less competitive.

8 Strategies to Keep Your Coworking Space Successful

You can use various tactics to make your coworking space stand out in the marketplace. Let’s discuss a few of them here.

Use the Right Tech Stack from the Beginning

You have to spend money to make money, as the saying goes. Being clever about how you invest your capital will help you to navigate most of the challenges we’ve discussed here.

Coworking management software is one outlay that’s sure to pay dividends if you implement it properly. OfficeRnD’s Flex solution offers a range of useful features for coworking space managers, including the following:

  • Space management: Efficiently manage offices, desks, and meeting rooms.
  • Member portal: Offer members a self-service portal for bookings and payments.
  • Billing and payments: Streamline invoicing, payments, and financial reporting.
  • Community building: Improve engagement through communication tools and events.
  • Reporting and analytics: Gain insights into your workspace’s performance with detailed reports and analytics.
  • Access control: Integrate with access control systems for security.
  • Customizable branding: Personalize the platform to match your brand.
  • Integration capabilities: Connect the space with other tools and software.
  • Mobile app: Give members mobile access to the platform for increased convenience.

Conduct Market Research

For your coworking space to succeed, you must conduct thorough market research.

Start by understanding your target market’s needs and preferences. This involves gathering data on potential members, including their demographic details, work habits, and specific workspace requirements.

From there, analyze your competitors’ offerings to identify possible gaps in the market that your space could fill.

Choose the Right Location

According to the American Public Transportation Association (APTA), Americans took over 1.8 billion trips on all forms of public transportation in the first quarter of 2024.

So, if you want to maximize the value of your coworking space for your clients — especially if that space is in a bigger city — you might want to make sure they can access it easily from a nearby transport hub.

Develop a Unique Value Proposition

Differentiate your coworking space by offering unique features or services that set you apart from your competitors. These could include state-of-the-art technologies, tailored membership plans, or niche-focused facilities.

A clear and compelling value proposition will attract members looking for the specific benefits that your space offers. Emphasizing your unique selling points helps to position your coworking space as the preferred choice in what has become a very crowded market.

Keep the Customer Experience Consistent

A consistent customer experience is crucial for member satisfaction and retention. Be sure to provide reliable Wi-Fi, clean facilities, and responsive support.

Training staff to consistently deliver excellent customer service can also make a significant difference in how members perceive your coworking space.

customer feedback

Maintain Financial Discipline

Keep your overheads in check and manage your finances prudently.

If you think it will work for your company, introduce a flexible pricing strategy to accommodate different member needs and market conditions. That way, you can optimize your revenue and remain in a healthy financial position.

Gather Member Feedback — And Act on It

Collect feedback from your coworking space members through surveys and direct conversations to determine any needs and concerns they might have. Then, address these issues promptly.

Showing that you value your members’ input and are committed to enhancing their experience fosters trust and loyalty. Plus, continuous improvement based on member feedback helps ensure your coworking space remains relevant and responsive to the evolving needs of its community.

people talking

Prioritize Hospitality

Foster a sense of belonging and engagement among your coworking space members. You might do this by regularly organizing events, workshops, and networking opportunities that encourage interaction and collaboration.

Hospitality is a key part of this. As we outlined in this article, hospitality is a key differentiator of coworking spaces in 2024.

Avoid Common Coworking Space Pitfalls with OfficeRnD Flex

When you understand why coworking spaces fail, you’ll give yours a much better chance of success. Conducting market research, choosing the right location, building a strong community, managing resources effectively, and investing in the right products and services all help ensure your coworking space thrives in today’s increasingly competitive market.

If you’d like to learn more about how OfficeRnD Flex can help bring your coworking space to the next level, book a demo today or click here to start a 14-day free trial.

FAQ

How Can Coworking Spaces Address the Challenges of Member Retention?

Coworking spaces should focus on building a strong community, offering flexible membership options, providing excellent customer service, and regularly gathering and acting on member feedback to improve member retention.

What Is the Most Important Infrastructure for Coworking Spaces?

The most important infrastructure for coworking spaces is high-speed internet, a reliable power supply, and ergonomic workspaces, as these are essential for productivity and member satisfaction.

How Can a Coworking Space Stand Out From the Crowd?

A coworking space can stand out by offering unique amenities, fostering a strong community culture, targeting niche markets, and providing exceptional customer service tailored to the specific needs of its members.

What Caused WeWork to Fail?

WeWork’s troubles stemmed from a combination of rapid expansion, high operating costs, and management issues. The company aggressively leased large amounts of office space and spent heavily on luxurious renovations, which led to significant financial strain. Additionally, governance concerns and erratic behavior from its CEO contributed to a loss of investor confidence, culminating in a failed IPO attempt. These factors combined created a precarious financial situation that drastically affected the company’s stability and reputation.

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".