You walk into a coworking space and it all looks like it’s working. The flex desks are taken, the meeting rooms are booked, the private offices have names on the doors. The design is sharp, the community manager knows everyone by name, and there’s a halfway-decent coffee programme running in the corner. So you do what every enthusiastic entrepreneur does: you run a quick back-of-the-envelope P&L. Part-time flex desks at $250, maybe 150 members, fifteen offices at around $1,000 a month, minus a rough guess at rent and payroll. Perhaps you hand the numbers to an AI assistant to check your maths. And you reach the conclusion that every operator has heard from a prospective member at least once: they’re killing it.
The reality, according to Jamie Russo who runs profitability analysis for coworking operators and hosts the Everything Coworking podcast, is rather different. Most coworking spaces are not killing it. This is a genuinely difficult business to run well, and most operators struggle with their profit margin. The problem is either a revenue problem, an expense problem, or, more often, an uncomfortable combination of both. And none of it is visible from the sofa in the lounge area.
The trap of reverse-engineering success
The instinct to copy a space you admire is understandable. You’ve been a member somewhere, you fell for the atmosphere, and you decide to build your own. only better and more profitable. Russo calls this “reverse-engineering the coworking space you love,” and it’s where a surprising number of new operators go wrong.
What you’re copying is the front of house: the aesthetic, the vibes, the busy bodies at the desks. What you can’t see is the lease structure behind it, the build-out costs buried in the balance sheet, the occupancy ramp that took three years to reach break-even, or the concessionary pricing that filled those offices in month one. A polished, Instagrammable, fully-occupied space is not necessarily a profitable one. Occupancy is a vanity metric if the average revenue per member doesn’t cover the cost per square foot.
This matters whether you arrived as a member who caught the bug, as an asset owner with vacant floors to fill, or as a seasoned operator chasing expansion. The discipline has to come before the design.
Build the model before you build the space
Russo’s core message is that aspiring operators should build their business model around realistic benchmarks like rent, payroll, revenue and profit before they fall in love with a fit-out. That means pressure-testing a few uncomfortable numbers early.
- Rent as a percentage of revenue: A common failure mode is signing a lease that looked manageable on day one but eats the margin once you discount for the long ramp to full occupancy. Operators need a rent target that leaves room for the business to breathe, not one that only works at 95% utilisation.
- Revenue mix, not just headcount: Flex desks, dedicated desks, private offices, meeting room credits, virtual mail, event hire and partnership income all behave differently. A space that leans too heavily on low-margin flex membership can look busy while barely covering payroll. Private offices and longer commitments tend to carry the economics; flex fills the rooms.
- Payroll and the hidden service layer: The hospitality feel that members love, the greeting at the door, the remembered coffee order, the events programme, is staff time, and staff time is the second-largest line after rent. Understaff and the experience collapses; overstaff and the margin does.
- A realistic path to profit: Profitability analysis tends to reveal that the gap between “full” and “profitable” is wider than founders expect. The fix is rarely more members; it’s a healthier spread of revenue, a tighter lease, and a community team sized to actual demand.
What the operator’s blind spot means for the market
There’s a wider lesson here for the flexible workspace market and for the clients who use it. The sector has matured past the point where growth at any cost was the story. Operators that survive are the ones who treat coworking as a unit-economics business, not a branding exercise. For landlords weighing a flex partnership, that means looking past the lobby and asking about margin per square metre. For members, it’s a reminder that the spaces most likely to still be there next year are the ones run on solid numbers, not just good light.
The coworking model still works. The demand is real, hybrid working has made flexible space a permanent fixture of corporate real estate, and the best operators are building durable businesses on it. But the romantic version such as open the doors, fill the desks, count the money was never accurate. The spaces that look effortless are the ones where someone did the unglamorous maths first.
If you’re thinking of opening a coworking space, don’t start with the space you love. Start with a spreadsheet. Model the rent, the payroll, the revenue mix and the months it will take to reach break-even, and let the aesthetic follow the economics not the other way around. And if you’re already operating and the margin won’t cooperate, the answer probably isn’t another member; it’s a closer look at the lines you can’t see from the lounge.
