Are Coworking Spaces More Cost Effective than Traditional Leases?

Coworking spaces have definitively evolved from buzzworthy trends to viable and competitive office solutions in 2023.  

One recent analysis conducted by CoworkingCafé sheds light on one reason behind the growing popularity of flexible workspaces, revealing that they are more affordable options in most U.S. cities. The study examined 146 cities across the U.S., comparing the costs of dedicated desk packages in coworking spaces with average office lease rates for a team of 10 over a one-year period. 

In 96% of the cities analyzed, coworking spaces emerged as the more cost-effective option. What’s more, coworking subscriptions were found to cost less than half the price of an office lease in 17 U.S. cities.  

The greatest price disparity was observed in Santa Monica, Calif., where coworking spaces offered a staggering 62% discount compared to traditional office space. On the other end, CoworkingCafé reported that Kansas City, Mo. had the smallest price difference by less than 1%. 

This benefits of a coworking space rather than a regular office lease go beyond financial factors; it’s also about adaptability. The inherent flexibility of coworking spaces, initially designed to cater to freelancers and startups, has proved invaluable for businesses of all sizes, especially during periods of growth or restructuring. Additionally, as companies recognize the importance of work-life balance and adapt to changing work norms in the workforce, coworking spaces are providing a solution that allows employees to diversify their routines and bridge the gap between remote work and traditional offices. 

The analysis also reveals that coworking spaces are particularly appealing to small and mid-sized companies — with the demand for flexible office spaces generally around 10 seats or fewer. Shared amenities are another factor that makes coworking a practical choice for companies with up to 50 employees. 

While coworking clearly has an edge in most cities, the study points out a few exceptions. Cincinnati, Ohio, and New Orleans, La. standout in the report as the only two cities where office leasing emerged as the financially sound choice, albeit with modest savings. This shows that while coworking is a favorable option in the majority of cases, local market dynamics and unique cost structures are also decision-making factors for businesses. 

The data also suggests that the demand for workspace flexibility is here to stay. The rise of project-based collaborations, the pursuit of better work-life balance, and industry-specific fluctuations — such as massive tech layoffs — are all contributing to adoption of flexible coworking spaces.  

While the future remains uncertain, due to larger firms like Amazon and Goldman Sachs demanding a stricter return to the office, the imbalances uncovered by this study are indicative of the stable movement towards flexible work environments. As businesses navigate an ever-evolving commercial real estate landscape, the versatility offered by coworking spaces are likely to play a pivotal role in shaping the future of work.