When coworking magazine DeskMag recently asked 1,500 international members of the coworking movement about their experiences, most of the news was positive. But as we reported at the time, one negative figure stood out. Only 40 percent of coworking spaces appeared to be profitable.
How bad is the news that more than half of coworking spaces are losing money? Does this spell possibly fatal trouble for the advance of the idea? DeskMag dug further into the figures to find out.
It turns out there’s a big disparity between the profitability of brand new coworking spaces and those that have been around for more than two years. And, as DeskMag explains, this fact coupled with the relative infancy of the movement means the prognosis isn’t so dire:
It should be noted that very few companies in any industries achieve a profit in their first months of existence. And currently, more than half of all coworking spaces are under one year old. That the majority of spaces are not turning a profit could have much to do with the infancy of the movement.
Another important limitation is the corporate form. If 13% of all spaces utilize a non-profit organizational form, economic gains are placed behind social gains for a portion of the industry….
And finally, the long-term picture should be kept in mind. The second Global Coworking Survey shows that 72 percent of all coworking spaces become profitable after more than two years in operation. For privately-run [sic] coworking spaces (those which are not non-profit groups or government-run), the profitability rate after more than two years is even higher, at 87 percent.
Like many of the coworking space founders we’ve talked to, DeskMag also agrees larger spaces tend to do better financially.
70 percent of all privately operated coworking spaces that serve 50 or more members run a profit. Only one in five spaces in this category suffer losses. Coworking spaces with between 10 and 49 members have a profitability rate of about 40 percent — close to the overall average. The more members they take on, the more profitable they become. Economies of scale also affect coworking spaces.
The most difficulties are suffered by small spaces with less than ten members; 56% of them report a loss. Even though they pay less rent and have lower operating costs, only a quarter of small spaces achieved a direct profit.
The overall takeaway here may simply be that while coworking is a “movement” and for some is more about community and quality of life than the bottom line, the spaces themselves are also businesses and will be subject to the same principles — including those that dictate profitability won’t be instant and economies of scale will be in effect — as any other enterprise.
For much more on the finances of coworking spaces, especially details of how many founders initially make it work, check out the complete post.
If you’re a member of a coworking space, do you know how it’s doing financially?
At Net:Work, we’ll explore coworking’s growing collaboration with big business. Is this a boon for both? The event will be held in San Francisco on Dec. 8.
Image courtesy of Flickr user timetrax23.