Last weekend I bumped into a friend in downtown Princeton and we got to talking about co-working spaces. My friend, Susan, actually brought up the topic, asking if I knew anyone who owned a co-working space. As it turns out, I do, so that’s what we talked about; although the more we talked the more I questioned her about the wider co-working industry.
During our conversation Susan mentioned she was busy setting up a new co-working space. A building owner in her town was willing to reconstruct his building’s interior to suite her co-working space blueprint. But as she mentioned design it got me thinking about co-working and, above all, I wondered how people make a profit from it. There had to be more to it than just opening a space and selecting the right software package to manage the space.
In the last fifteen years co-working spaces have cropped up in countries all around the globe and especially in cities all over the developed world. But how do these spaces succeed. Now that they are becoming better known and widely used, which co-working sites make money and which ones don’t. I started looking for answers and found there are a few basic categories of co-working spaces and that a co-working business in any of these categories is capable of being successful if the owner/manager matches the category to his or her particular market’s needs.
As I thought about my friend opening up a co-working space and read through dozens of articles about co-working spaces here are the four categories I found. There are curated spaces, dedicated spaces, enhanced spaces and cool spaces. Let’s get into it.
Curated Spaces Get Results
In our newly evolving work force there are many more independent contractors than there were just ten or fifteen years ago and these independent contractors seek more than just an office to work in. They are looking for relationships that can grow in directions they would not have access to without other people. The right combination of people with the right contacts among them can generate a great deal more work than any of them could generate independently. One technical expert brings in another and then another and they all vouch for each other. But how does a small group of free agent contractors come together in the first place? And how do they get to know each other?
A discerning owner of a co-working space can be the catalyst that bring together a covey of energetic, professional experts. It can be a little like the French salons of the eighteenth and nineteenth century. This is a bit of a reach, but the space manager is the madam of the room carefully looking to bring together professionals who will share and support one another.
It’s a great way to fill a co-working location and the space manger serves as the initial scrutiny of integrity, professionalism, contacts, dependability and general value to a larger group of professionals. That also means the manager has to turn down people who don’t match the spaces’ needs. And, the manager has to help keep the resident companies focused on productive work, which means the space’s amenities all have to work efficiently. There’s money in owning a co-working space where the manager becomes that central impresario.
Why You Should Focus On Just One Type
Another way of making money with co-working space is by dedicating the space to a particular industry or a particular part of the workforce. When Regus originally opened their spaces they were looking for traveling businessmen and businesswomen. They were, at first, dedicate co-working spaces for travelers. There have been co-working spaces dedicated to women and to non-profits, but most often there’s money in dedicating a co-working space to a particular industry. The friend that I knew who already managed a co-working space, when Susan approached me about co working, has a dedicated space that deals with the public relations industry. Everyone who rents office space and or use of her space is involved in PR. Other spaces deal with design, technology and food. The money works when the space is carefully matched with a local community or is located in a city large enough to support one of these specialized spaces.
The challenge for this strategy is to build a culture among subscribing members that allows each member to participate but also that protects their proprietary projects and professional secrets. To that end these co-working spaces often use thumbnail security systems for internal offices and also wipe data and browsing histories off of shared computers and equipment every time someone new sits down to use the electronics.
Get Ahead Faster With Extra Features
Yet another way of profitably marketing co-working space is to offer an enhanced working environment. This is not about being interesting or cool, it’s about offering specialized amenities like machinery, laboratory equipment, or a specialized library, or other equipment that would be prohibitively expensive for a small office to finance, but which can be supported by a larger group of users, such as at a co-working space. For instance if a co-working space in a community that has lots of scientists offers use of their electron microscope as part of the available features in their co-working space, that would be an enhanced co-working space. Use of the microscope would be by appointment and at no extra fee.
The key to success with this strategy is to know the work force in a particular locality and know their work needs. Offering those needs at a rental price point that allows amortizing the special equipment purchases over a large group is what makes it work. The co-working space manager has to know the area of expertise of these workers and may even have previously participated in that type of work.
What Exactly Is The Cool Factor?
Finally, we come to the most commonly known strategy of co-working spaces and that is, of course, just offering a very cool working environment. Co-working spaces have gotten a lot of media attention for these cool spaces with their fancy coffee machines, gym workout equipment, pool tables, leather couches, musical equipment and a whole lot of other life-style paraphernalia. The spaces are often designed with attractive colors, fabrics and materials that make them uniquely a work and home cross bread – maybe something like a clubhouse environment.
But don’t be fooled by the cool strategy’s visual trappings, that is only part of the strategy. The cool features offer the public relations come on and are magnetic for workers, but the money is in the real estate arrangement. Most of these cool co-working spaces offer many small private offices. The key to financial success is to lease out densely occupied floor space – many offices with low square footage is critical to making the strategy work.
Often these spaces are reworked commercial office spaces that a commercial realtor was no longer able to rent out at workable prices. By allowing an entrepreneur to step in and convert the space to a more densely packed co-working space the new arrangement makes a bad situation work – at least for awhile. The risk is that if the economy turns down and workers don’t renew their co-working space memberships then the whole strategy falls apart, leaving the co-working entrepreneur on the hook for monthly rent to the original space owner.
Well there you have it, four strategies that co-working space managers and owners are using to profit in the new working environment of the twenty-first century. Look for new spaces to open near you and try to identify what strategy they are using.