How profitable are coworking spaces? How do I start a coworking space business?

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Before we answer this question, let’s first discuss how coworking spaces typically make money.

Membership Fees

Coworking space revenues can come in many forms.  The largest revenue contributor to coworking spaces franchises and businesses are the membership fees. There are various levels of membership fees that cater to working professionals and SMEs to larger Fortune 500 companies that need to house senior management in prestigious locations. It can also range from private offices, from large to small, to open space memberships. According to DeskMag, “Coworking spaces earn the majority of their revenue, unsurprisingly, by renting out desks (61%).”

On-Demand and Virtual Coworking Spaces

Some clients may prefer a pay-as-you-go fee structure, and offering on-demand use is an effective way for coworking spaces to cater to a different market segment that would normally not be interested in the usual membership structure.

Office Amenities

While membership fees account for a majority of the shared workspace revenue, there are plenty of opportunities to upsell additional services and products to members. Some examples include:

  • Meeting room rentals, including any audio/visual equipment and/or video conferencing equipment
  • Premium coffee and tea and other snacks may be sold in the office canteens to those looking for a quick bite before the next meeting or as a pick-me-upper
  • Usage of copier and fax machines
  • Luxury massage chairs that are coin or card operated
  • Vending machines that serve coffee, tea, other beverages and snacks
  • Concierge services for VIP clients and guests
  • Additional desks, chairs, telephones, etc. for private offices
  • Larger and more prominent company logos in the lobby / reception area
  • And more

Of course, there are startup costs associated with opening a coworking space business. The primary costs include:

  • Leasing or the purchase of real-estate
  • Architectural fees required for zoning, coworking floor plan designs, and materials for aesthetics.
  • Furniture, fixtures, and office equipment
  • Technology, software, telecom equipment, internet connectivity and cyber security
  • Staff salaries and benefits
  • Insurance
  • Office inventory such as coffee, printers, paper, etc.
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If done correctly, coworking spaces can be quite profitable and the industry profit before taxes and depreciation can average anywhere from 10 percent to 50 percent. The payback period may be as short as 2 – 3 years. The driver of profitability depends on the brand’s value, its location, products and services that have competitive pricing, office design and features that are relevant to the target market, an effective sales and marketing, extensive staff training to help ensure operational and cost efficiencies, and the support of the parent company. 

In many cases, coworking spaces are offered as franchises, and the franchisor’s proven and successful business model is licensed to qualified franchisees. Some of the best coworking spaces franchises include companies like International Work Place (IWG) – Regus, Signature by Regus, SPACES, HQ, No. 18, OpenOffice, BASEPOINT. In fact, IWG and its various brands have over 3,100 locations around the world, and members of each location may freely visit other locations within the network. 

Author: Sean T. Ngo is the CEO and Co-Founder of one of Asia’s leading franchise consultancy (franchise brokerbrokerage), VF Franchise Consulting. He is Vietnamese American and has been living in Vietnam for over 16 years. You can reach him at [email protected] or [email protected].

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