Coworking vs Private Office Space

Coworking is a business -- if it didn’t make dollars, it wouldn’t make sense.

Coworking vs Private Office Space

When people think about coworking spaces, the first thing that usually springs to mind is convenience (and maybe WeWork).

Coworking spaces allow companies to jump right in — no need to hire movers or spring for a long-term lease. Companies can find a space that fits and generally start working there within a few weeks, if not sooner. And of course, everything they need is already there: the electricity and internet are turned on, the desks, computers, and printers are in place, and the all-important coffee bar/lounge area is ready for happy hour.

For many small companies just starting out, coworking spaces are ideal in that they meet all your needs at a fraction of the cost of private office space (see more benefits here).

But if your company is growing, all that convenience can come at a price.

Crunch the numbers

Coworking is a business — if it didn’t make dollars, it wouldn’t make sense. Like any business, they have overhead costs and for coworking spaces, the overhead isn’t cheap. Between leasing office space, designing the interiors, supplying all those wonderful amenities, and keeping rental and membership costs competitive for their users, they also have to turn a profit. So, how do they do it?

Simple: By putting a lot of people in the same office, and a lot of people means less privacy and more distraction — exactly what you want to avoid in the first place.

Hmm. Is there a middle ground? Let’s crunch some numbers.

Typical coworking spaces cost between $700 and $1000 per employee per month, in New York City. For our purposes, let’s say $850 because it’s right in the middle. So for a company with 10 employees, that equals $8500 a month, all bills paid.

Now, let’s look at a private office in Midtown, one of the more expensive neighborhoods in New York.

The breakdown

Rent averages $90 Per Square Foot (PSF) per year, but that’s largely skewed by ultra-high-end offices on the avenues. In fact, there are high-quality office spaces available in Midtown for between $48 and $55 PSF. (There are currently hundreds available at this price point right now.) For our purposes, let’s go with $50 PSF.

That’s only rent, we need to be sure to include bills and taxes, which generally run about $5 PSF, meaning your total cost for the office would be $55 PSF.

Let’s have 10 employees. Rule of thumb for a private office is 150 square feet per employee which means you’ll need 1500 square feet total.

1500 square feet x $55 PSF = $82,500/year = $6,875/month. (And that’s in Midtown!)

In addition, most leases include a month or more of free rent so your true cost is even lower. With nearly $2,000 extra every month, you’ll have the opportunity to create the office of your dreams, with all the amenities you want, and end up saving a ton of money in the long run.

For those of you just starting out, stick to coworking

Obviously, this math doesn’t work out for smaller companies just starting out, those who need greater flexibility, or ones less settled in their business.

Coworking spaces are great places to network and make connections with other entrepreneurs. By allowing small companies to save money and build their business in a fully-equipped office where like-minded people are gathered, the cost and impact benefits of coworking spaces are easy to see.

If you travel regularly and only need an office a few days a week, or if you have a remote team that only needs to have an all-hands meeting twice a month, then a coworking space is perfect for you.

A typical office lease runs from 3 to 5 years. If your company is still unsure about its footing in the market or if you’re embarking on a risky new venture, that amount of time can be intimidating. Coworking spaces offer month-to-month options, so if things don’t work out, then no harm, no foul.

An office you can grow into

The math is simple — once your company is stable and has more than 10 employees, you can save an enormous amount of money leasing a private office space. And beyond the money saved, the benefits of a private office are huge.

The obvious benefit is right there in the name — “private office space.” It’s yours. There’s no need to worry about who might overhear a phone call or walk by a conference room when you’re in it. In addition, you never have to worry about other people sharing the coworking space making too much noise, or throwing an impromptu happy hour when you’re expecting to meet with a big client.

Because the space is yours, you can make it your own. You can slap your company logo any place you’d like. You can redesign or build out the space to fit your needs. You can create an office that reflects your company culture and mission so that when you interview a potential employee or bring in a client, they’ll be greeted with your values, instead of what appeals to the coworking company you’re renting from.

Finally, if you are expecting to grow your company (and who isn’t?) in a coworking space, every new employee you hire raises your rent by $700 to $1000 a month, which only increases over time as your staff grows. If you are leasing a private office, every new person you bring on board lowers your staff to space ratio, saving you even more money in the long run.

Rethink what’s possible

For new startups, small companies, or those unsure of where they’ll be six months from now, coworking spaces are the ideal places to do business because they provide everything you need to get started.

But for larger, more established businesses, it’s time to think again, because for companies as small as 10 employees, or those looking to grow, private office space can ensure your privacy, embrace your company culture, provide better amenities, and, most of all, save you money both now and in the long run.

Searching for commercial real estate in New York City can be overwhelming, so why not let someone else help you do the heavy lifting?

Whether you’re embarking on a risky new venture and considering potential coworking availabilities or if you’re a larger, more established business and want to dip your toe in the Manhattan commercial real estate market, Nomad Group can locate the perfect space catered to your company’s exact needs.