Can Coworking Spaces Be Profitable?

7 Comments

There’s an interesting debate on the profitability of coworking spaces unfolding over at CoolTown Studios. Most current coworking communities are focused on building a community and only just break even, or are subsidized by a sponsor. Writer Neil Takemoto suggests that coworking centers could become profitable by providing a “connecting agent” to take over some of the sales and marketing functions that would normally have to be handled by the members themselves, while taking a small cut of the members’ revenue in the process.

Though the collectivism implied by Takemoto seems workable and even desirable, it’s something that’s potentially fraught with dangers. For example, the underlying values of coworking could be challenged when members with overlapping skills need to compete to fulfill a referred client. Mechanisms and processes for harmonizing such potential conflicts need to be robust and transparent, in order to maintain the community’s coherence.

There’s perhaps an alternative “long tail” of revenue opportunities for coworking spaces in providing “à la carte” value-added services. For example:

  • Charging drop-ins a small “pay as you go” fee for daily use, rather than the member’s traditional “pay monthly” subscriptions.
  • Reselling web hosting or magazine/service/software subscriptions.
  • Providing externally-sourced legal and accounting expertise, where suppliers pay referrals for access to the community.
  • Providing innovative nutrition services from companies such as Graze.
  • Leasing and renting meeting space to non-members for modest fees.
  • Hosting “master classes” and training courses for local businesses.

Even subsidized spaces can find a number of modest revenues from value-added services tailored to their members, without raising their fees or jeopardizing the careful mix of members and the community’s values.

I’m interested to hear what additional value coworkers feel they might be able to accrue from their coworking communities, so do leave your thoughts in the comments below.

7 Comments

Chris Mosely

I run a new coworking space in Melbourne, Australia. We now have over 30+ different companies working out of our space. We have a commercial focus, so we also talk about Serviced Offices and Virtual Offices. It’s a hive of entrepreneurial activity, but we’re also looking at how to make it profitable. It’s a real challenge because profitability doesn’t always fit with our ideals. Basically we set ourselves up to help small entrepreneurial companies to succeed, and a big part of that is providing services as cheaply as possible. On the other hand, if you do it at break-even or below, you cannot continue to do that for very long. We’re starting to think that to make other’s successful financially we also have to think more about profit, but it’s also a dangerous thought IMHO.

We’re constantly looking for new ways of improving net revenue to the space, the problem is as soon as we do, we want to spend it on the space again :)

Holly Blondin

I am in the processing of starting a coworking space in New York City. For those of you who have already started your coworking businesses, could you share your challenges in finding the “right” space and also what was your initial overhead?

Bleddyn Williams

This is a great topic and one that we are dealing with in London Soho where we have a co-working community of around 50 freelancers and small businesses in all. I think that a vanilla-co-working space is break even if you are lucky. In the long term as the other posters have said, there needs to be some other revenue that brings in that little bit extra, whether that be additional telephone answering services, PA services, Seminars and so on. We are trying a mix of these at the moment.

Imran Ali

@Glenn & @Tony – thanks for your comments :)

@Jeremy – Do contact me ([email protected]) about putting together a closer WWD look at NextSpace.

Jeremy Neuner

I’m the co-founder and CEO of a NextSpace, a coworking space in Santa Cruz, CA. We’ve been open for just over six months, have over 100 members, and are at the break-even point in our business model. I agree that a long-tail approach to profitability is the way to go. We could cram more paying members into the space (we have almost 11,000 square feet and can handle more members), but at some point, the experience for the members drastically diminishes in quality. Many have written that in a coworking space, the community comes first. I completely agree, so we’re careful (after learning some tough lessons) with how we balance what’s good for the community vs. what’s good for the business. So for now, we’re turning to training and education as an additional revenue stream. Later this month, in cooperation with a few of our power members, we’re launching The Hope Foundry (www.HopeFoundry.com). Our intent is to train new Drupal developers, which is a high-demand skill set in Santa Cruz and Silicon Valley. The program is free to students and is underwritten by local businesses that need new websites. Once the economy climbs out of the abyss, we will develop additional revenue streams through consulting and capital formation. But we’re excited about Hope Foundry and all of the amazing stuff that our members are working on at NextSpace.

Tony Bacigalupo

It’s something we’ve been thinking a lot about at New Work City, and it looks like some answers may lie in those last two bullet points (education + events).

In both cases, you’re making use of the space during off-hours and still offering things that are complimentary to the community and the membership models.

IndyHall is heading in this direction already, and it will be very interesting to see how these models evolve over the course of the next year as coworking spaces continue to mature.

Glenn Friesen

great article. I think demand gor coworking spaces will continue to grow as corporations continue to cut staff and job market remains competitive. With a talented but jobless pool of people, there’s bound to be more high quality entrepreneurs looking for a base.

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