The landscape of coworking spaces is evolving, with operators increasingly scrutinizing the financial viability of their amenities. This shift is driven by a need to maximize revenue per square foot and achieve profitability in a competitive market. A recent discussion on the Everything Coworking Podcast, titled "How to Evaluate the ROI on Your Amenity Spaces," delved into the complex decision-making process behind retaining, repurposing, or removing these often passion-driven additions. The core challenge lies in balancing the intangible benefits of amenities with their tangible costs, both direct and indirect.
The genesis of many coworking amenities can be traced back to the personal passions of founders. For instance, an operator might establish a state-of-the-art podcast studio because they personally value such facilities, or to differentiate their offering in a crowded market. This was the case for the founder of Enerspace, a Chicago coworking space launched in January 2012. With a vision for "Workspace Plus Wellness," the space featured 18-foot ceilings, brick-and-timber construction, and a panoramic Chicago skyline view. Prominently located adjacent to premium office spaces was a 400-square-foot fitness studio, equipped with kettlebells and featuring a trainer conducting sessions a couple of times a week. The investment extended to a $7,000 shower, a significant expense in 2012, aimed at enhancing the wellness offering. While the intention was to monetize these features eventually, the initial focus was on brand building rather than strict revenue optimization per square foot. This scenario is not unique; many coworking spaces feature coffee bars, podcast studios, fitness rooms, kids’ rooms, and wellness rooms that consume valuable square footage and incur costs, or forgo potential revenue.
The fundamental question operators must ask is twofold: does the amenity generate direct revenue, and does its mere promise help sell memberships? These are distinct inquiries that require separate evaluation.
The Emotional Roots of Amenity Investment
The allure of unique amenities often stems from a founder’s personal experience or a desire for market differentiation. A podcast studio, photography studio, or fitness room frequently originates from an owner who felt a particular amenity was missing in their previous coworking experience. Alternatively, it might be a strategic choice to stand out against competitors by offering a facility that no other local space provides. In these instances, the amenity is often perceived as both a differentiator and a potential revenue stream, rather than a pure cost center.
However, as coworking spaces mature and the focus shifts towards financial performance, operators begin to re-evaluate these initial investments. The pursuit of target profit margins and revenue per square foot often leads to a critical examination of amenity spaces. The difficulty in this process is the emotional attachment operators develop to these features. Removing an amenity can feel like a betrayal of the brand’s identity or core culture, especially when it was initially marketed as a key differentiator. This internal conflict, as experienced by the Enerspace founder with their fitness center, highlights the challenge of making rational business decisions when faced with emotionally charged branding elements.
Quantifying the Cost of Unmonetized Space
The financial burden of underutilized or non-revenue-generating square footage is a critical consideration. This issue was a central theme in discussions leading up to a panel on key performance indicators at the GWA conference, featuring experienced operators from Lucid Private Offices, Pacific Workplaces, and Premier Workspaces, all of whom manage office-centric models.
Lucid Private Offices, for example, deliberately avoids a traditional coworking or dedicated desk model. Their floor plans typically exclude amenities like fitness studios or podcast rooms, with the exception of a potential wellness room. Their operational strategy targets profit margins exceeding 20 percent, with a strong emphasis on revenue per square foot across their entire portfolio. This approach necessitates that every square foot contributes to the bottom line. Large hallways, unmonetized lobby areas with flexible seating, atriums, and extensive elevator banks all detract from potential revenue-generating space. Amenity spaces, by their nature, fall into this category of potentially underperforming real estate.
Operators bear the cost of rent and common area maintenance (CAM) charges for every square foot, regardless of its revenue-generating capacity. For some, CAM charges can be substantial, potentially reaching $6 per square foot, compared to a more typical $1 per square foot. For a 400-square-foot fitness studio, this translates to an annual occupancy cost of approximately $14,400, based on a hypothetical $30 per square foot rent and $6 CAM charge.
The opportunity cost is even more significant. A photography or content creation studio, for instance, can occupy the footprint of a large team office, accommodating five to six desks. In many markets, this space could generate $2,000 to $3,000 per month in rental income. A simplified calculation illustrates this point:
| Space Allocation | Potential Revenue |
|---|---|
| Six desks at $400/seat | $2,400 per month |
| Over one year | $28,800 |
If a dedicated studio space is not clearing this revenue threshold, it is demonstrably underperforming. Given that this potential revenue would come with minimal additional costs, a substantial portion would contribute directly to profit margins. By retaining such amenities without a clear revenue strategy, operators are effectively forfeiting significant profit potential.
The decision to retain certain amenities, despite their cost, hinges on the two key questions: does it earn direct revenue, and does its promise contribute to membership sales?
Amenity Category 1: Direct Revenue Generation
For some amenities, a clear path to direct revenue exists. If a podcast studio, for example, is booked frequently enough to generate more income than a meeting room or private office of equivalent size, its retention is a straightforward business decision. In such cases, converting the space to a traditional office or meeting room would not yield higher returns, and if the studio also positively impacts lead closure rates, its value is further amplified.
Some operators have successfully tapped into local communities of photographers and content creators, achieving significant utilization of their creative studios. This success is often linked to their ability to demonstrate tangible revenue generated by these spaces. However, this level of success is not the norm across the industry.
Amenity Category 2: The Promise of Membership
Beyond direct revenue, the aspirational value of amenities plays a crucial role in attracting and retaining members. Renting an apartment can serve as an analogy: a tenant may rarely use the building’s swimming pool or host parties on the rooftop deck. However, the mere existence of these amenities can be a deciding factor in their choice to sign a lease. They resonate with an idealized version of themselves who would utilize these facilities.
Similarly, members may be influenced by the presence of showers, locker rooms, or meditation rooms, even if these spaces see low utilization. In many coworking and office environments, these amenities are frequently underused, yet they still factor into a prospective member’s decision-making process.
The founder of Enerspace observed this phenomenon firsthand. An admired entrepreneur, who also served as a small employer offering wellness benefits to their daily office-attending staff, expressed strong appreciation for the fitness space and its programming. This feedback, while positive, can sometimes be disproportionately valued by an owner, leading to an inflated perception of the amenity’s impact.
To avoid such biases, it is essential to rigorously test the claim that an amenity sells memberships. This involves candid feedback from the sales team regarding how amenities are perceived during tours and direct observation of prospective members’ reactions. Crucially, operators should inquire about the potential impact of removing the amenity: would it deter a significant number of potential members, or only a handful?
Categorizing Amenities for Strategic Evaluation
Coworking space amenities generally fall into several common categories, each with distinct economic implications.
Food and Beverage
This is often a highly desired amenity, yet it is notoriously difficult to monetize effectively, even when occupying significant square footage. An operator in Denver, who owned their building and dedicated substantial space to a "cute cafe and coffee bar," found that even at a large scale, the cafe struggled to sustain itself as a full-time operation, functioning primarily as an amenity.
Nick Clark, founder of The Common Desk, reached a similar conclusion regarding coffee services. He noted that coffee is a high-foot-traffic business, requiring an ideal location to be profitable. While exceptions exist, a business of this nature typically needs higher volume than a typical coworking space can generate, unless it’s part of a much larger, high-traffic campus.
The same scrutiny applies to grab-and-go cafes, often added in less walkable areas to offer members convenient food options. The 80/20 rule frequently applies: 20 percent of members utilize the amenity, while it occupies space that could otherwise be monetized. The critical question remains: could membership levels be maintained without it?
Fitness and Wellness
The experience at Enerspace highlights the challenges of fitness amenities. Across various operators and models, a consistent observation is that members rarely integrate midday workouts into their workday. For women, in particular, this can be a significant logistical hurdle, involving hair and makeup considerations in the office. Consequently, most women tend to avoid using these facilities during work hours.
Wellness rooms, however, represent an exception. They are increasingly considered essential "table stakes" in the coworking industry. These spaces serve diverse needs: nursing mothers, individuals feeling unwell, or those requiring a mental health break during the day. Members expect such a facility to be available, even if they don’t need it regularly. While offering a wellness room is advisable, it should not occupy prime real estate with optimal natural light.
Podcast and Photography Studios
These amenities often appear to be a strong proposition due to the prevalence of content creators and the appeal of having such facilities available. However, actual bookings can lag behind expectations. Unless an operator has a deep understanding of and connection to the local demand for these services, it is prudent to assume low utilization until concrete data proves otherwise.
Kids Rooms
Kids’ rooms are less common. Operators who implement them often have a strong commitment to supporting parental work-life balance. While these spaces are difficult to monetize directly, they consume valuable square footage.
Melanie Marconi’s Vida Coworking in Oregon exemplifies this category. Their kids’ area offers after-school programs and holiday camps. This amenity is likely central to her brand and contributes to membership sales. However, a strategic approach might involve making the room multipurpose, allowing it to function as a meeting room during hours when children are not present. Maximizing the utility of any amenity space by making it multipurpose can significantly increase its operational efficiency.
Retaining Value While Minimizing Footprint
Before converting an amenity space into traditional offices, operators should explore options to retain the perceived benefit within a smaller footprint or to make the amenity self-sustaining.
The Enerspace fitness studio provides a clear illustration. While the studio saw modest use in the mornings and afternoons, it remained largely empty during peak business hours. What emerged as surprisingly popular were meditation sessions led by a yoga teacher. Members across various roles would take short breaks to participate. These sessions did not require dedicated square footage; a meeting room or a small flex space would have sufficed. By reducing the physical footprint of the fitness studio and converting the prime, skyline-view real estate into offices, wellness programming could have been maintained and offered to a broader segment of the membership.
The Denver operator adopted a similar strategy for their coffee bar. Instead of closing it entirely, they transitioned from full-day staffing to covering only peak morning and afternoon hours. This approach met the majority of member demand without the sustained fixed labor costs of a full-day operation.
Some operators go further by transforming amenities into distinct revenue-generating products. An operator in Arizona successfully leveraged their fitness space by selling memberships to personal trainers, who paid for access to train their clients. Her own members retained access to the space during non-peak training hours. Similarly, an operator in New Mexico offers a photography studio membership, allowing photographers to book a set number of hours monthly for client sessions. Before outright removing an amenity, operators should investigate whether such a monetization model is feasible.
Implementing Metrics and Deadlines for Amenities
A structured approach to evaluating amenities involves quantifying their direct earnings, estimating the revenue potential of equivalent office or meeting room space, and assessing the proportion of total square footage dedicated to amenities.
In a 20,000-square-foot facility, a couple of small amenity rooms can be accommodated with minimal financial impact, as they represent a small fraction of the total monetizable space. However, in smaller spaces, such as 6,000 or 8,000 square feet, non-revenue-generating amenities are a luxury that few operators can afford unless they can demonstrate indirect financial benefits through increased membership sales or enhanced customer lifetime value.
For underperforming amenities, a period of focused marketing efforts, typically three to six months, should be undertaken. If utilization metrics do not improve, the space should be repurposed into a revenue-generating function. The most challenging aspect of this process is maintaining objectivity, even exhibiting a degree of ruthlessness, regarding spaces that may hold personal significance. Seeking an external perspective from someone outside the business can be invaluable in analyzing the numbers objectively.
Ultimately, the profitability of a coworking business relies on fundamental operational strengths: a favorable lease structure, an optimal product mix of office sizes, adequate parking, convenient accessibility, a prime location, a capable team, and exceptional service. When a coworking space excels against its competition, it is typically these foundational elements that drive success, rather than the added amenities intended as differentiators.
This article is the written companion to episode 437 of the Everything Coworking podcast, "How to Evaluate the ROI on Your Amenity Spaces." For a more comprehensive exploration of each amenity category, listeners are encouraged to access the full episode.
