Guides
Coworking Space Site Selection: Checks Before You Sign
Coworking space site selection starts with desk count math, not square footage. Model every lease line, tour at peak hours, and confirm permits and tax forms.
What to take away
- Coworking space site selection is a desk-count decisionchoose the desks you can fill, not the square footage you can rent.
- Meeting-room demand, not desk demand, usually decides whether a floor plan works.
- Base rent, CAM, TI amortization and buildout capex each belong in your model as its own line, and each one should come to you in writing from the landlord before you sign.
- Confirm zoning, occupancy, accessibility and fire duties with the local authority having jurisdiction and a licensed inspector.
- Model prepaid dues with a CPAa corporation files Form 1120, a partnership Form 1065, a sole proprietor Schedule C.
This article covers business planning for a coworking site. It is not legal, tax, accessibility or safety advice. Lease terms, entity structure and compliance duties depend on your state and municipality, so take them to a licensed attorney and a CPA.
Start with the desk count, not the floor plan
Work backwards from members. A site that carries 180 desks at 70% occupancy sells about 126 desks. Multiply that sellable desk count by your blended rate per desk per month to get monthly recurring revenue before meeting-room income.
Desk Math Before the Tour
- 180desks in site
- 70%target occupancy
- 126desks sold
- 126 x Rmonthly recurring revenue
Two ratios decide whether that revenue covers the building: desk-to-member ratio and meeting-room utilization. The desk-to-member ratio tells you how much space each member actually needs once you count dedicated desks, hot desks and private offices. Meeting-room utilization tells you whether the rooms you are paying for earn their square footage. Set your own target for each one from your own membership data, because a benchmark borrowed from another market will not tell you what your trade area will support.
Measure both before you tour. A broker showing 12,000 square feet is selling area. You are buying a ratio.
The lease costs you have to model each month
Base rent is the number on the term sheet. Your occupancy cost is larger.
Occupancy Cost Lines to Model
- Base rentper rentable square foot, per year
- CAM chargesreconciled annually
- Escalationsfixed step or CPI
- Percentage rentlandlord share above breakpoint
- TI allowanceamortised or repaid
- Insurancequote before signing
| Line | What it covers | How to model it |
|---|---|---|
| Base rent | The floor itself | Per rentable square foot, per year |
| CAM charges | Lobby, lifts, common HVAC, grounds | Per square foot, reconciled annually |
| Escalations | Fixed annual step or CPI | Apply to every year of the term |
| Percentage rent | Landlord share above a sales breakpoint | Rare in coworking, common in retail |
| TI allowance | Landlord contribution to buildout | Amortised into rent or repaid |
| Insurance | Liability and contents | Quote before you sign |
Add buildout capex:
- partitions
- power drops
- HVAC balancing
- access control
- furniture
- network cabling
- signage
First-Year Cash Need
- Rent
- CAM charges
- Buildout capex
- Payroll
- 3-6 months operating reserve
Percentage rent is the clause that catches coworking operators, because membership dues can be written to look like sales. Have an attorney read that clause specifically.
Tour at the hours your members use
A weekday at 11am tells you almost nothing. Go at 7am, at 6pm, on a Saturday, and during a storm. Check lift wait, restroom count per floor, and whether the HVAC runs on weekends.
Tour Timing and Counts
- 7am weekday
- 6pm weekday
- Saturday
- During a storm
- Lift wait
- Restroom count per floor
- Weekend HVAC operation
Count the parking spaces against your peak desk count. Count the meeting rooms against the number of members who will book them. A floor with two rooms for 200 members will produce complaints in month two.
Run the same checks at comparable sites. Tour space run by established operators such as WeWork and Industrious, and count desks, meeting rooms and restrooms there the way you counted them on your own tour.
Then walk the accessible route from the street to the desk, including the restroom. The Department of Justice guide for small businesses, U.S. Department of Justice: ADA Guide for Small Businesses, explains barrier removal and readily achievable standards for existing facilities. Whether a specific building complies is a determination for a licensed inspector, not for this article.
The three checks that kill deals
Permitted use. Coworking is not a standard zoning category in every municipality. Confirm the use, occupancy load, hours, signage and parking minimums with the local planning office before you spend on design. Ask which approvals apply: a zoning or conditional use permit, a building permit for the buildout and accessibility scope, a certificate of occupancy, a fire inspection sign-off and a separate sign permit.
Utility capacity. Count the amps available against the amps your buildout needs. Power drops, HVAC tonnage, ventilation and network riser access are the four items that turn a cheap floor into an expensive one.
Emergency planning. Occupational Safety and Health Administration: Emergency Action Plans sets out the core elements:
- reporting
- evacuation routes
- accountability for who is still inside
- medical duties
- contacts
- training and plan review Coworking adds a wrinkle, because your members are not your employees and may not know the floor.
The U.S. Small Business Administration: SBA Business Guide walks through startup costs, permits, insurance and hiring in the order most operators hit them. For demand, work from data you can inspect yourself: broker reports, transit ridership and trade-area foot-traffic counts, checked against what you see on your own tours.
Write the walk-away rule before you negotiate
Set the limits in writing while you are still unemotional about the building. A workable rule names the maximum occupancy cost per desk, the maximum buildout capex, the longest acceptable delay to opening, and the landlord duties you will not accept unresolved.
Then check the operating side. Membership pricing tiers, deferred revenue treatment of prepaid dues, CAM reconciliation and churn all belong in the same model as the rent. Review occupancy, desk-to-member ratio and meeting-room utilisation monthly, not annually.
Software choices matter here too. Kisi and Brivo cover access control; OfficeRnD and Nexudus cover booking and billing. Whichever you pick, booking, access control and billing should run as one system or three that talk to each other, because a site that reconciles access logs against invoices by hand loses the margin it gained on the lease.
Common questions
How many desks should a coworking site have?
There is no universal number. Work from the demand you can verify in the trade area, then apply your target occupancy to get sellable desks. A site that is too large for its market carries empty square footage for the whole term.
What is the biggest lease mistake coworking operators make?
Reading the lease too fast, particularly percentage rent, CAM caps, restoration duties and personal guarantees. Have a licensed attorney in your state review the document before you sign anything binding.
How should prepaid membership dues be handled?
Prepaid dues raise deferred revenue questions under US tax rules. The return itself goes on Form 1120, Form 1065 or Schedule C depending on your entity, and a change in accounting method is requested on Form 3115. Confirm the treatment with a CPA rather than relying on a general guide.
Do I need a permit to open a coworking space?
Almost always, and often more than one. A zoning or conditional use permit, a building permit, a certificate of occupancy, a fire inspection sign-off and a sign permit all come from your local authority having jurisdiction. Confirm the current requirements with that office and a licensed inspector before you commit to a lease.
