Since the financial crisis, the dynamics of business and office space have changed significantly. More and more people want to work from home or in a flexible workspace. The coronavirus pandemic may have been stopped briefly, but it is widely considered a pause affecting the growth of this sector. Just ten years ago, many professionals were baffled by the concept of coworking spaces.
The current social situation, due to COVID-19, is affecting everyone in this sector, which has some of the most innovative spaces in the country. When you stop playing and do yoga to relax, you have the opportunity to pay attention to your body and your environment. Any dose of refreshment and creativity is good, but we need to have a stern eye on the future.
The outlook for the coworking spaces industry
Over the next few years, the coworking space industry is expected to see a dramatic increase in popularity. Due to the coronavirus pandemic in 2020, the growth rate has been reduced, but is expected to recover by the end of the decade.
This year’s projected growth rate of over 20% is a strong selling point. It has become more than just a place for writers to work.
How do you increase profitability?
Coworking spaces have turned a profit on about half of their business plan so far. That may not be the most important number, but this new industry has taken off. Because of the large number of new coworking spaces, it can take a while for a business to break even. According to one study, within two years of opening, 70% of coworking spaces are profitable. There are some methods to turn a space into a lucrative business. Here are some examples:
1. Increase profitability
Margins are crucial to making a creative coworking space more profitable. Each month, a business has a lot of fixed and variable costs to account for. As the business grows, so do salaries, rent and other operating expenses. A 10% monthly profit is not uncommon for a commercial property.
Instead of growing the business, the goal of a profitable coworking space should be to increase profits. When profit margins are higher, so will the profit. Offering high-margin services to customers who are willing to pay for them is the key to this increased profit margin. With the increasing diversity of the industry, more customers are using the basic spaces needed for high-margin services.
2. Attract new high-spending customers to the service
Because of their small size, freelancers are not able to spend as much money on coworking spaces as larger companies. These well-established companies, on the other hand, tend to have offices in many countries. Therefore, they are no longer limited to one location.
The latest trend is to contact these companies and see if they would be interested in setting up a satellite office. It is not uncommon for high-end clients to be willing to pay extra for a more convenient service.
3. More private offices
For profitable coworking spaces, renting out private offices rather than membership packages focused on a single office can increase revenue. While the traditional idea of renting out offices persists, the most lucrative buildings have adapted to the growing demand for private offices. To some extent, subletting causes the coworking space to lose its original purpose.
The location of a coworking space can have a significant impact on its performance. If a city has a population of one million or more, its profit margin increases significantly for that business. According to one study, coworking spaces located in larger cities improve their profitability by 55%.
In a smaller city, profitability is 30% lower if the same space is offered. It’s always a good idea to locate a coworking space in a megacity, although the situation has shifted in favor of smaller cities.
There’s plenty to be excited about in terms of the potential for growth and profitability in this sector. We’re curious to hear your perspective on the post-pandemic state of the coworking industry.