90% of coworking spaces generate a profit if they meet at least four conditions: they have more than 200 members, are older than one year, are profit-oriented and do not subsidize their operation through other businesses. The first condition is the only one that actually requires any special effort. However, these are not the only factors that make a cost-effective operation possible. In addition to these, we are also publishing the annual profit margins of profitable coworking spaces for the first time.
For three years now, the share of profitable coworking spaces has remained at roughly the same level, with 43% of all coworking spaces generating a direct profit from their operation. One third of spaces operate at break-even point, whereas every forth coworking space continues to make a loss.
In a similar way, the ratio of core business models has not changed much either. 83% are “for-profit” businesses, and 12% operate as “non-profit” companies. Furthermore, two thirds of all coworking spaces need to be self-sustaining and do not receive cross-income from a larger business model, the same number as in previous years. The share of new coworking spaces that are one-year old or younger - and therefore perhaps not yet profitable - fell only slightly. Nevertheless, a lot has changed compared to previous years.
More offices: How profitable coworking spaces operate
Profitable spaces significantly increased their revenue stream by renting out private (team) offices (37%). This is now above the level of renting out desks and combined membership plans (merged: 35%).
Accordingly, the average layout of profitable coworking spaces has altered. The working areas are continuing to distance themselves from the classic concept. Private offices now occupy as much space as open workspaces (34%). It is only the additional lounge/coffee space (9%) that enables the open nature of the space to remain.
About every ninth coworking space rents out more than 60% of its space as private offices. In times of high demand for such spaces, this lessinnovative form of subletting provides a solid financial basis, but does put their classification as coworking spaces into doubt.
Very high and very low churn rates indicate uneconomical operation
This year’s survey enabled us to determine the monthly churn rate of coworking space members. The majority of coworking spaces operate at a profit when the monthly churn rate is around 5%. The more they deviate from this value, the more precarious their financial situation becomes.
Coworking spaces rarely generate a profit when they lose virtually no members or a relatively high share of members each month. In these cases, however, they usually serve a small number. Since small member numbers have a stronger influence on the churn rate, it is more likely to move up or down.