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Is Shared Office Space Right for Your Small Business?

ByBen Mizes,
business.com writer
|
Sep 24, 2019
Image Credit: fizkes/Getty Images
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Before choosing the layout of your office, consider these pros and cons.

Coworking passes what we call the "great idea" test.  Although it's only been around for a few years, it's already become so integrated into our lifestyles that it's impossible to imagine life without it, much like social media or ridesharing. 

And though co-working spaces, with their casual dress codes, first-come, first-served seating arrangements and Thursday happy hours, can seem slightly whimsical, co-working is very serious business. Industry leader WeWork has become the second-most valuable "unicorn" startup in the world, behind Uber, and is currently valued at a staggering $47 billion. Not bad for a company that was founded less than a decade ago.

Here at Clever Real Estate, we spent our first year at local co-working space T-REX, and although we've since moved to our own office, we still miss the vibrancy and energy of sharing a workspace with so many other inspiring creatives and entrepreneurs. Of course, there are also things we don't miss, like toting our laptops home and back every day and having to book meeting spaces in advance. Like most things in life, coworking has its unique pros and cons.

What is shared office space?

The vast majority of co-working spaces use the same general model. For a monthly fee, users get access to a large, shared office space. Basic users have access to desks, tables and offices on a first-come, first-served basis, meaning that if you roll in at 10 a.m., you're probably going to end up sitting at the desk by the bathroom. Users who upgrade their plan can rent a desk or even an office for their exclusive use, and there are usually a limited number of conference and meeting rooms, though these need to be booked in advance.

Most coworking spaces have shared common areas and kitchen. Many host weekly networking events, during which users of the space can socialize and learn about each other. That's more or less all there is to it.

Why has it become so popular, so fast? The short answer is that the recent emergence of the gig economy, widespread entrepreneur/startup culture, and remote work apps like Slack have created a perfect storm of demand almost overnight. But that doesn't mean coworking makes sense for every business.

What are the pros of shared office space? 

Inspiration

Working in a traditional office means seeing the same people every day of every week for years at a time. Even if you love your co-workers, it's easy for a traditional office to fall into a creative rut. Not so at a shared office space.

Anyone who's ever spent time around a startup entrepreneur knows how energizing it is to be close to intense ambition. Now imagine being surrounded by those people every day. Hustle and creativity are contagious, and shared office spaces can be incredibly effective incubators. In fact, companies like Uber, Spotify and Instagram all started out in coworking spaces.

Defined boundaries

When you're just starting out as a company, it's tempting to work out of your home. After all, it's free, there are snacks in the kitchen, and the commute is short. But anyone who's ever worked from home on a long-term basis knows how difficult it is. You're surrounded by distractions, and the sheer informality of it quickly dissolves any boundaries between your work and your home lives.

Working in a shared office space solves that problem. When you're at the office, you're able to focus and work at maximum productivity, and when you're at home, you can relax and recharge. One study showed that workers who use co-working spaces are 74% more productive, more creative and collaborative. In fact, according to the Harvard Business Review, employees who use coworking spaces report much higher levels of job satisfaction than workers in traditional offices.

Cost

When you talk about traditional offices, the elephant in the room is cost. Office space is expensive. Coworking spaces offer a cheaper alternative, and come with unprecedented flexibility, compared to the years-long leases at a traditional office building. 

After all, when you're assessing the cost of having a traditional office, rent is just the beginning. An office needs to be furnished, and there are ongoing costs like electricity, internet, heating/cooling, cleaning and maintenance. On top of that, in most major markets, commercial landlords will ask you to sign leases that run for several years. Businesses that are just starting out know they may not even exist in five years.

What are the cons of shared office space?

Logistics

When your business uses shared office space, that can mean your employees won't even sit together consistently. That can make it hard for them to stay in contact or collaborate. And if your team is struck with sudden inspiration, you may have to hold your brainstorming session at a noisy, crowded Starbucks if all the conference rooms are already booked. 

Many coworking spaces don't offer much storage either, which means you'll have to lug your laptops and anything else you need to and from the space every day. Meeting a friend for a drink after work is much more complicated when you're carrying the contents of an entire cubicle in your backpack. 

Commuting

The main reason that traditional office space is so expensive is the same reason that any real estate is expensive: location. Prime office space is centrally located and easily accessible to employees. Not so with coworking spaces. With so many studies finding a correlation between worker satisfaction and short commute times, getting your employees to traipse out to the warehouse district every day is not only a very big ask, it could actually impact their overall productivity and quality of work life.

Is shared office space right for your small business?

Only you can answer that question. But there are a couple of general metrics you can use to illuminate an answer.

How many employees do you have? Depending on how much office space costs in your market, there's going to be an exact point where a traditional office becomes more cost-effective than coworking. In a market like Boston, with lots of shared office spaces and high commercial rents, that magic number is 20 employees, meaning that until you have 20 employees, it’s going to be cheaper to cowork. On the other hand, in a market like Dallas, that number could be as low as three. 

How stable is your business? If the office spaces you're targeting are asking for five or 10-year leases, how confident are you that your business is going to last that long? Do a ruthlessly objective assessment of your business's long-term viability before you sign a long-term lease. If there's significant doubt, consider co-working until your outlook firms up.

How much will you actually use your office space? If your business employes programmers who are going to be grinding out 80-hour weeks, a great private space is probably worth it. But if you work in a field where you're going to be traveling for conferences, networking events and raising funds 40 weeks a year, it doesn't make sense to pay rent on a space that's going to be empty most of the year.

Ben Mizes
Ben Mizes
See Ben Mizes's Profile
Ben Mizes is the co-founder and CEO of Clever Real Estate. He's an active real estate investor with 22 units in St. Louis and a licensed agent in Missouri. Ben enjoys writing about real estate, investing, personal finance, and financial freedom. He's a serial entrepreneur, having run several successful startups before Clever Real Estate. Ben's writing has been featured in Yahoo Finance, Realtor News, CNBC, and BiggerPockets.
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