Finding cheap office space that doesn't feel cheap at all is no easy task. Insert Coworking:
Yesterday afternoon, Bloomberg published an article titled, “Co-working: An Expensive Cure for Loneliness.” The article attempts to break down coworking by the numbers. It cites that the average coworking dedicated desk costs $526 a month, more than seven times as much as a typical office space. The problem with these numbers is that they paint an incomplete picture.
Of course there are the intangibles of coworking. Nobody can argue the fact that a good coworking space provides a culture that is unmatched in the world of freelancers and small businesses, but let’s push that aside for now and simply focus on the price of membership compared to the cost of a typical office space rental or lease.
To understand the numbers, you must first understand how a commercial office landlord calculates the average price per square footage for commercial property. As a tenant of an office building, you have “usable square feet” being occupied, but you pay based on the “rentable square feet.” Usable square feet includes the specific area the tenant will occupy in order to do business. This includes all office space plus any storage or private restrooms. Rentable square feet, the space the tenant is financially responsible for, accounts for common areas such as corridors, building amenities, lobbies, stairways, restrooms and so on.
To calculate rentable square feet, landlords use what is called a “load factor” (also called a common area factor). The load factor is equal to “rentable square feet” divided by “usable square feet.” An average load factor of a multi-tenant office building is around 15%. The idea is that, as a tenant of a multi-tenant building, you pay for your proportionate share of the common areas. A commercial office building typically accommodates 3-5 people per 1,000 rentable square feet. Thanks to Bloomberg, we know that Midtown Manhattan’s annualized office space rents averaged close to $67 per square foot in the fourth quarter last year. If we assume an employee occupies approximately 250 rentable square feet at $67 per square foot per year, the cost of that desk is approximately $1,396 per month. That is 2.65 times higher than the average cost of a dedicated desk at a coworking space.
The above math also assumes a full service lease, which is what you get at a coworking space. Almost all commercial leases now charge additional monthly fees for utilities, which is referred to as a “rent plus electricity” lease. Some lease agreements make the tenant responsible for real estate taxes, building insurance, and maintenance as well. This lease type is referred to as a “triple net” lease. These add-ons to base rent can easily lead to an additional $5 per square foot annually.
At Common Desk in Dallas, you can find the coworking space best suited for your needs. A dedicated desk starts at $450 a month with no term required. The 60 inch by 30 inch desk space also includes unlimited use of 2,000 square feet of conference rooms, 800 square feet of lounge spaces, 625 square feet of cafe / breakroom space, and 300 square feet of restrooms. Private office space starts at $750 a month, as well. In addition, Common Desk is responsible for office supply-related expenses such as coffee beans, computer paper, whiteboard supplies, and so on. The same is true of countless other coworking spaces. A coworking membership is not only full service, it’s turn-key.
Coworking allows the mobile workforce to benefit from economies of scale, substantially lowering monthly “rent” for individuals and small teams.
Oh yeah, there are also the intangibles of benefiting from the community, collaboration, and ambience that coworking provides, among other coworking basics.