We also replaced some old questions with new ones in the 2023 survey. In what areas did coworking space staff work? And what were the most cost-effective tools for attracting members?
We will share the results in another article. But we can already write about where profitable coworking spaces excel. In contrast to unprofitable spaces, their employees were more involved in community and hospitality management.
Profitable spaces acquire members cost-effectively with SEO and community building - but not everywhere
Among the most cost-effective customer acquisition activities, coworking spaces that invested in SEO or referral payments were the most likely to operate in the black. However, both were only reported to this extent in megacities. Referral payments were also much less frequently reported. It is quite plausible that financially strong locations could afford such measures more often.
In smaller cities, however, coworking spaces were more likely to be profitable if they invested in community building. Spending on discounts and advertising showed a similar correlation. However, the majority of spaces did not rank the latter two as the most cost-effective. Presumably, profitable coworking spaces only engaged in these activities if they already had the economic power to do so.
A profitable coworking space generates an average return of 20%
So far, we've only focused on the percentage of coworking spaces that turn a profit. But what about their margins?
The average margin of a profitable coworking space in the survey was 20% - slightly higher than before the pandemic.
In general, the margin says nothing about the absolute return. And since it was only reported by profitable coworking spaces, it would also drop relatively significantly along with unprofitable ones.
Small locations are the biggest in return on investment, but...
However, there are coworking spaces that are far above that, with margins of 30% or more. As before the pandemic, small coworking spaces were the least likely to be profitable. However, when they did operate at a profit, they generated the highest returns of all coworking spaces. In absolute terms, however, these profits are likely low due to their small number of members.
Based on their layout, they offered fewer private offices, but relatively more event and meeting space. However, they derived most of their revenue from direct desk rentals, with desks likely cramped in the small spaces.
On the expense side, high-profit spaces were characterized by lower rental expense ratios. Since they more often own the real estate of their location themselves, this may also explain their higher margins.
Excluding these special cases, the returns of profitable coworking spaces were between 15% and 20%. Again, coworking spaces could not translate economies of scale into higher margins unless they operated a larger number of locations. In addition, returns often declined when there were many coworking spaces in close proximity. So competition does not necessarily reduce the likelihood of profit, but it does reduce margins.
As always, we have summarized all the findings in charts. The basic report is available for free here. Detailed results, including a comparison by groups, can be found here. We also published two articles about the business trends of coworking spaces in 2023.
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Only individuals who represented a coworking space or flexible workspace were included in the analysis. A total of 422 respondents met this criterion. Data was collected between February 9 and June 24, 2023. Learn more about the respondents here.
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The 2023 Global Coworking Survey is supported by the following organizations:
★ Our Main Supporters: ★
Yardi Kube helps operators automate their space, drive revenue, reduce costs and efficiently scale their business.
Nexudus is a leading white-label platform to help coworking space operators with their day-to-day tasks.
☆ Our Official Supporters: ☆
Coworking Europe, European Coworking Assembly, German Coworking Federation, Coworking Switzerland, CoWorkLand, Bisdesk, Cobot, Cat Johnson, Rubberdesk, Coworking Canada, andCards, One Coworking, deskpass, Republic of Work, Coworking Library, Women Who Cowork, Salto Systems, Aurora Coworking Network, Coworking Association Ukraine, DeKamer, ThisWeekinCoworking.com, The Melting Pot, London Coworking Association, Happy Working Lab, ezeep, Proova, ULSL, Coworking Kemnath, Coworking IDEA Project, ZonaLiquida, & ImpactHub.
