The coworking industry has become a fixture in conversations about the future of work, with headlines touting flexible office models and the supposed decline of traditional leases. But for independent operators trying to build viable businesses, the reality is far more complicated than the popular narrative suggests. Jamie Russo, founder and CEO of Everything Coworking, has spent years working with both small entrepreneurs and large property owners and sees firsthand the challenges and opportunities facing the sector right now.
Two Types of Coworking Operators
Today’s coworking landscape is split between two main types of players: small independent operators and large asset owners. Russo works with both, and she describes their motivations and challenges as fundamentally different. Independent operators are typically small business owners who open coworking spaces for reasons ranging from a passion for community to a desire to diversify income. Asset owners are commercial property holders looking to reposition part of their portfolio by adding flexible workspace.
This divide reflects a broader trend in commercial real estate. While local entrepreneurs continue to open coworking spaces across the country, large property owners are increasingly using coworking to address vacancy and changing tenant needs. For asset owners, flexible workspace is less about building a brand and more about adapting existing assets to a post-pandemic office market.
Asset Owners Drive Market Growth
Despite the industry’s fragmented appearance, Russo sees a clear pattern in where most new coworking spaces are being added. Asset owners are driving most of the growth, with significant existing space. These owners are repurposing underperforming office buildings to attract tenants who expect flexibility, amenities, and short-term lease options.
Since the pandemic, demand for traditional office space has softened, prompting landlords to rethink how they use their properties. Many landlords have found that converting a portion of their buildings to coworking can maintain occupancy and generate revenue from tenants who might otherwise look elsewhere. This trend is most pronounced in urban markets with high office vacancy rates.
Profitability Takes 18 Months
One of the most common misconceptions Russo encounters is that a coworking space can become profitable quickly. In reality, stabilizing a new location typically takes about 18 months, even in favorable markets, Russo says. This timeline holds regardless of the operator’s experience or the size of the city.
Coworking businesses start with zero members and must build a customer base from scratch. Member acquisition is gradual, with new sign-ups arriving month by month. Even with strong marketing and a good location, reaching break-even occupancy requires sustained effort. Russo cautions against expecting overnight success, noting that patient, consistent outreach is essential.
Private Offices Drive Revenue
The most important lesson for new operators is that the coworking model relies heavily on private offices rather than open desks or communal areas. Russo is direct: coworking spaces that lack a significant share of private offices rarely achieve long-term profitability. Most users need acoustic privacy, especially as remote work and virtual meetings have become standard. Open seating and hot desks may appeal to some members, but they do not generate the stable, recurring revenue necessary for a sustainable business.
This runs counter to persistent myths that define coworking as open-plan, collaborative spaces. In practice, most members seek private offices where they can take calls and work without distractions. Private offices also have the highest lifetime value, as tenants tend to stay longer and pay more for dedicated space.
Members Expect More Than Desks
The market for flexible workspace has become more sophisticated, with users demanding more than a desk and Wi-Fi. Russo notes that today’s members expect hospitality-level service, amenities such as food and beverage, and easy access to retail or transportation. Spaces that offer only basic office functions are increasingly seen as generic and interchangeable.
This shift has raised the bar for operators, as delivering a compelling user experience now requires investment in design, technology, and service. Operators who fail to meet these expectations risk losing members to better-equipped rivals. The result is a higher barrier to entry and greater operational complexity, particularly for newcomers without experience in the hospitality or service industry.
Location Determines Coworking Success
National headlines about the coworking boom can obscure the fact that outcomes vary widely by location. Russo points to Dallas and Atlanta as markets where coworking has gained significant traction, noting that flexible workspace accounts for more than 3% of Dallas’s total office inventory. In these cities, coworking thrives due to strong local economies, population growth, and large employers seeking flexible solutions.
Key factors include commuter patterns, such as geographic spread and traffic congestion; the presence of major employers; and demand for flexible space near corporate hubs. Markets with high demand for short-term or project-based office use tend to support more coworking growth, while others lag.
Asset Owners Seek Experienced Partners
Asset owners interested in adding coworking to their buildings rarely attempt to operate these spaces themselves, Russo notes. Running a coworking business is operationally intensive, requiring expertise in marketing, sales, and hospitality, areas where traditional real estate firms often lack experience. The most successful models involve partnerships with experienced coworking operators who have proven track records and understand the ramp-up timeline.
Asset owners typically seek partners who can demonstrate financial stability and operational expertise. These partnerships allow landlords to offer flexible workspace without the risks and complexities of day-to-day management.
Early Decisions Shape Profitability
Russo argues that the most important factors determining a coworking business’s success are established before the space opens. Location, real estate deal structure, and product mix, particularly the ratio of private offices to open space, largely determine whether a business will be profitable. Operators who secure favorable lease terms, choose strong locations, and design spaces around private office demand are significantly more likely to succeed.
Russo warns that many newcomers underestimate the importance of these early decisions, focusing instead on branding or community-building after launch. The groundwork laid before opening sets the trajectory for long-term performance.
Outlook: Fewer Operators Will Thrive
As coworking matures, Russo expects the industry to become more demanding for operators, especially independent ones. User expectations around design, hospitality, and amenities will continue to rise, making it harder for basic spaces to compete. Delivering a premium experience, including food and beverage service, means only well-capitalized and well-prepared operators are likely to thrive.
For real estate professionals and entrepreneurs considering coworking, success requires more than optimism or following industry trends. It demands careful planning, a realistic understanding of local market dynamics, and investment in both product and service. The coworking boom may generate headlines, but the path to profitability depends on discipline, preparation, and a clear-eyed view of what today’s users want from their workspace.
About the Expert: Jamie Russo is the founder and CEO of Everything Coworking and a former executive director of the Global Workspace Association. With nearly a decade of experience operating coworking locations and advising operators across the country, she coaches entrepreneurs and property owners on launching and managing flexible workspace businesses.
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
