Is It the Right Moment to Open a Coworking Space?

A few days ago, someone asked me if it was a good time to start a coworking space.

The truth is, it's difficult to give an answer without being swayed by my preconceived opinions of the coworking industry.

Thus, I decided to analyse the latest survey from Deskmag to find a definite answer without letting my emotions cloud my judgment.

So, is the timing right?

Here are the findings from the Deskmag survey:

Taking a look at the survey information, you may find it challenging to separate the valuable insights from the rest due to the abundance of data and graphs presented by the publication's team.

However, globally, Deskmag's trajectory has established itself as a reliable benchmark for measuring the sector's evolution over the last decade.

Spoiler alert: we are in the best time in history to open a flexible workspace.

Why?

Let's delve into it.

In 2012, 37% of spaces (in for-profit organisations) were not profitable.

By the end of 2023, this percentage had decreased by 41%, representing only 22% of the surveyed spaces.

In other words, approximately 79% of flexible workspaces today are either profitable (27%) or very profitable (52%).

These figures have never been reached before in the coworking industry.

The value proposition has evolved.

So, should you open a space?

Undoubtedly, the data collected by Deskmag on managers' opinions is more favourable than ever.

But before diving in, let's examine the trends that can guide your decision-making process.

Between 2012 and 2023, the value proposition of flexible workspaces has transformed.

When analysing the changes in the percentage turnover of each service, significant shifts become apparent.

It's important to note that these findings from Deskmag cannot be universally applied to every flexible workspace worldwide.

Different regions, cities, and neighbourhoods have distinct needs.

Therefore, it's crucial to evaluate the type of users and needs in your area and compare them with the global trends discussed in this article.

Between 2016 and 2023, revenue from open space positions, whether dedicated desks or hot desks, decreased from 40% to 29%, marking a reduction of 28%.

Conversely, revenues from private offices doubled from 17% to 35%.

Moreover, meeting space rental revenues increased by 33%, from 9% to 12% of the total, and virtual office revenues rose from 3% to 5%, an impressive increase of 66%.

In essence, if you're planning to create a space today, the mix should include at least 55% private offices, with appealing and accessible meeting rooms for both internal and external clients.

This is unless you're situated in a highly touristic location or have a vibrant community of creatives/freelancers seeking interaction or ultra-flexible pay-per-use products.

Target user demographics are crucial.

Spaces catering to teams of 10 to 100 people are most frequently profitable or very profitable, accounting for 84% of cases.

Additionally, it's no surprise that spaces with a gender balance of 80% or higher experience significantly reduced economic performance, being profitable only approximately 47% of the time.

Cost considerations are paramount.

One key factor is the diminishing impact of rent on the space's overall costs, decreasing by 21% from 43% in 2016 to 34% in 2023.

Additionally, profitability increases as the space accommodates more members, particularly between 100 and 249 members.

These spaces claim to be very profitable 66% of the time.

Considering both metrics, I would advise against opening a space with fewer than 50 members.

A glance at the graph shows why: only 67% are profitable or very profitable.

Conversely, spaces with 50 or more members are profitable 83% of the time.

When scouting for a location, remember that blindly signing leases at any price has never been, nor is it today, a wise decision.

Reducing the impact of rent is essential for a healthy bottom line.

For many operators, signing a lease today is something to avoid, especially in a market transitioning towards a management model, which in markets like the U.S., exceeds 40% of agreements with landlords.

If this concept is unfamiliar to you, you can read more about it here.

So, is it a good time to create a flexible workspace?

No, it's the best time.

Create a space with a significant proportion of private offices, strive for reasonable rent (or better yet, a management contract) for a space capable of hosting at least 50 members, and understand that your target audience will make the difference.

The numbers speak for themselves!