Coworking as a Business Opportunity

As the coworking space continues to gain attention, especially with the growth of the tech industry and reports of WeWork raising $335M at a valuation of almost $5B, more potential investors are drawn to the market. With the Atlanta Tech Village, we’ve had the chance to learn first-hand about coworking and flexible office space for over two years now, and have several thoughts on the market.

Here are a few pros and cons of coworking as a business opportunity:

Pros

• Fulfills a growing desire for freelancers, entrepreneurs, and creative class employees to have a sense of community
• Capitalizes on millennials entering the workforce and their expectations of a different office environment
• Allows repurposing of existing office space into a higher value offering
• Provides greater efficiency for business expenses like internet access, conference rooms, break rooms, etc. (e.g. with a direct lease, many items are dedicated that don’t need to be dedicated)

Cons

• No barriers to entry as office/retail space is abundant
• High customer turnover due to a less stable target audience
• Expensive renovations required for a high-quality, creative feel
• Prevalence of hobby and labor-of-love coworking space providers (e.g. many coworking spaces are subsidized and have a social mission)
• More labor intensive than traditional office space

As a business opportunity, I don’t think coworking is a good place to make strong returns unless there’s a unique, differentiated brand whereby people are willing to pay significantly above market rates for the space. Most professional investors getting into the coworking market will fail. Coworking, in order to build community, is an amazing opportunity.

What else? What are some other thoughts on coworking as a business opportunity?