Coworking Spaces Today: Navigating Economic Challenges in the Post-Pandemic Era
The landscape of coworking spaces has undergone a profound transformation in the aftermath of the pandemic. While the global crisis is technically over, the economic challenges for coworking spaces persist, and are shaping the industry's current situation in diverse ways.
While the global crisis is technically over, the economic challenges and member acquisition struggles are still hurtles that operators need to navigate in order for coworking spaces to persist.
Economic Recovery Disparities:
Despite the pandemic's end, a significant portion of coworking spaces are still struggling to return to their pre-COVID-19 economic levels. Surprisingly, large coworking spaces have managed to fare better than their smaller counterparts. However, a caveat lies in the exclusion of spaces that did not survive the pandemic. The selective analysis of coworking spaces that participated in a 2023 Global Coworking Survey skews the overall perception, making it vital to consider the full spectrum of coworking spaces.
Member Acquisition Struggles:
One of the most pressing challenges faced by coworking spaces is the continuous need for new members. Nearly half of these spaces consider member acquisition their paramount concern. This struggle is intensified for newly established coworking spaces, which significantly impacts their sustainability. Small coworking spaces in rural areas face additional hurdles, finding it difficult to attract a substantial member base. Coworking spaces that are less than 1-2 miles from public transportation are faring better than those that are farther than 2 miles out. Profitability and member numbers also increase in suburban regions or areas of high inhabitants local to any particular space.
Real Estate Costs in Urban Centers:
High real estate prices pose a significant challenge for coworking spaces in major cities.
In major cities, exorbitant real estate prices persist as a significant hurdle. Larger cities witness a higher frequency of coworking spaces grappling with this problem. Conversely, rural regions largely remain unaffected by this challenge, providing a comparative advantage to spaces located in such areas.
Financial Difficulties and High Energy Costs:
Financial challenges plague coworking spaces regardless of their size or location. Spaces in poor economic situations are disproportionately affected. Moreover, high energy prices, notably in European locations, pose an additional economic burden, impacting operational costs and overall sustainability.
Space Constraints and Inflation:
Lack of space for expansion remains a prevalent issue, particularly for successful chains aiming to grow. Interestingly, inflation has emerged as a new challenge, impacting approximately one in six coworking spaces, predominantly in megacities. Rising costs due to inflation put strain on the financial health of these spaces, posing unforeseen challenges.
Demand for independent workspaces and private office space is the largest, above dedicated desk and combined membership plans, as of early 2023. The Survey, which was focused on coworking space profitability, found that while coworking memberships (all levels combined) are down, office space rental demand has increased, and desk sales (hot desk or dedicated desk) have declined. Interestingly, the majority of spaces surveyed felt that competition is not one of the biggest problems here.
Createscape members and staff pose for an impromptu photo in the Studio Space.
The Crucial Role of Community:
A defining factor in the success of coworking spaces is the presence of a vibrant community. Existing members and the social atmosphere within these spaces significantly influence the choice of coworking spaces. A lack of community directly translates into reduced revenue, especially for spaces in precarious economic situations. Newly opened or sparsely populated coworking spaces often find it challenging to foster a strong sense of community, impacting their financial sustainability.
In essence, while the pandemic's direct threat has receded, the economic challenges faced by coworking spaces continue to shape the industry. These challenges, ranging from member acquisition hurdles to real estate costs and community-building efforts, underscore the need for innovative strategies and adaptable business models to thrive in the evolving landscape of coworking.
Credits: 2023 Global Coworking Survery; deskmag.com; theglobeandmail.com (Photo)