Patrick Clark recently authored a throught-provoking article for Bloomberg Business in which he questions the high prices of many coworking spaces, ultimately deeming them as ‘an expensive cure for loneliness’. Yes, the word ‘expensive’ was used to describe coworking. And, square foot for square foot, the math supports his statement. Is it fair, however, to compare the cost of renting a desk at $526 per month to the cost ‘per desk’ broken out of an average cost of $67 per square foot for office space in midtown Manhattan? Put differently, what does the coworking experience add to the bare bones cost of the desk that justifies its price tag?
The article attempts to answer that question by unpacking the coworking experience and sorting the various benefits into quantifiable pieces. Not easy to do in an industry where “I’m selling you work-life balance, happiness, inspiration, and I’m selling you human contact,” in the words of Liz Elam, founder of Link Coworking in Austin.
What is the ‘secret sauce’ of today’s coworking space that makes its sum so much greater than its parts? Part of the answer may lie in the psyches of the young entrepreneurs who are flocking to these spaces in record numbers in an effort to circumvent (or at least soften) the harsh transition between college and the working world. We know from research that millennials respond poorly to the kinds of motivational prompts that propelled their grunt-working baby boomer parents to success. Rubbing shoulders with like-minded entrepreneurs and having access to local business leaders who could become one’s next boss or funding source, however, does have its advantages. Add to that lots of instant, positive feedback, some fun and games, and fresh juice and java and the coworking environment is a perfect fit.
But is this ‘perfect fit’ unfairly expensive, as the article seems to intimate? Or does the math simply defy a logical equation? The value of the intangibles may be the secret sauce at the center of a business model with very healthy margins indeed. According to Emergent Research consultancy founder, Steve King, “I’m willing to sign a long-term lease for a lot of space, get a much better rate than any individual can get, and then I’m able to charge them more than I’m paying.” That may be true, but is that money grubbing or is it smart business capitalizing on the value of a set of powerful intangibles? Food for thought. Let us know what you think.