Why Do Coworking Spaces Fail? 10 Lessons for Success

There were over 7,500 coworking spaces in the US as of October 2024, with 7% quarter-over-quarter growth. The demand for coworking is there — so why doesn’t every coworking space succeed?

In this article, we’ll walk through the ten reasons why coworking spaces fail to thrive along with some real-world examples of how Optix clients have succeeded by avoiding these dreaded coworking pitfalls.

Finally, we’ll share some actionable tips for how you can begin to grow a successful coworking business in 2025.

1. Poor location and accessibility

As they say in real estate, it’s all about location. A coworking location that’s inconvenient, lacks visibility, or isn’t easily accessible by public transportation can deter potential members. It may seem small, but proximity to complimentary services like cafes, gyms, or daycare can be huge.

Maggie, CEO and Founder at Elevate Coworking, specifically chose her coworking space location because there was plenty of parking in the area. She knew this would be important to her target demographic of busy moms and entrepreneurs. 

Tips for choosing a good location for your coworking space

• Research foot traffic patterns and proximity to complementary businesses like cafes and gyms
• Make sure the site of your coworking space has sufficient parking and is wheelchair accessible to accommodate diverse needs

2. Inadequate market research

Failing to plan is planning to fail. Not analyzing your target audience and local competition before opening your coworking space can result in misaligned offerings that don’t meet market demand or differentiate your space.

It’s one of the many reasons why we recommend writing a coworking business plan. Creating a  comprehensive plan before you open your doors will help ensure you’ve researched your market effectively, increasing your chances of success.

Tips for conducting market research for your coworking business

• Analyze other coworking space and shared space offerings in the area to identify gaps and opportunities
• Use local demographic data to tailor your offerings to the community
• Attend meet-ups of entrepreneurs in your area to gauge interest in a shared workspace

3. Weak community engagement

Remember, you’re not selling desks and WiFi — you’re selling the opportunity to connect with others and be a part of a broader community. This is invaluable both to your members and to your business.

Without fostering a sense of belonging and connection, members may feel disengaged and view the space as just another office. That’s why Mitchell, CEO and Founder at Suite Genius, has prioritized community building since his business’ inception over 10 years ago.

Tips for community building

• Organize regular events in your coworking space, such as workshops, networking sessions, and social gatherings, to build camaraderie
• Use coworking software like Optix to connect members with one another
• Task your community manager with fostering relationships and making members feel part of the greater community

4. Lack of a unique value proposition

Generic coworking spaces struggle to stand out in a crowded market, especially with more spaces popping up each and every day. A lack of differentiation or at the very least, a clearly defined point of view can hinder your ability to attract potential members to your space.

For niche coworking space operators like Steve, Founder at ECOMsquare, having a specific focus and commitment to members working in the ecommerce industry helped him very quickly grow his coworking space and his sense of community.

Tips for creating a unique value proposition

• Identify niche markets, such as freelancers, startups, or industry-specific professionals, and tailor services for them
• Offer unique amenities in your coworking space, such as podcast studios, wellness rooms, or mentorship programs
• Highlight your brand story and values to create a connection with potential members

5. Poor financial management

With coworking profitability such a hot topic in the industry, it makes sense that some spaces fail because of improper financial management. In fact, 25% of all coworking spaces fail to recoup their investments.

Mismanagement of budgets, overspending early on in your coworking journey, or failing to plan for lean periods can lead to financial instability and eventual closure. This is more likely to occur if you are a young coworking space or struggle with occupancy levels.

Tips for successful financial planning

• Develop a detailed budget that includes fixed and variable costs, and revisit it regularly
• Diversify revenue streams by hosting events, renting out meeting rooms, or offering day passes
• Use analytics in your coworking software platform to monitor cash flow and make data-driven decisions

6. Ineffective marketing strategies

Everyone is talking about marketing in coworking, and for good reason. It is one of your greatest superpowers when it comes to not only growing your business, but developing your brand. 

Relying solely on word-of-mouth or lacking a targeted digital marketing strategy can result in poor visibility when just starting out. According to Adam, Founder at KoWorks, you need to consider marketing strategies and tactics that go beyond the basics in order to attract the right members to your coworking space at the right time.

Tips for marketing your coworking space

• Invest in targeted digital marketing campaigns using social media ads and search engine optimization (SEO)
• Collaborate with local businesses to amplify your reach and credibility
• Consider where your target audience is most likely to be hanging out online, and be present in those places

7. Failure to adapt to market trends

The coworking industry is constantly evolving. Spaces that fail to adapt to emerging trends in coworking, like the rise of private offices or shifts towards hospitality-driven spaces, risk becoming obsolete.

In fact, when we asked a group of coworking owners and operators what they wish they knew before they started, one operator shared with us that she wishes she knew how in-demand private offices would be in her market. Being ahead of key trends like this one can help you find success long-term.

Tips for keeping up-to-date on the coworking market

• Follow coworking thought leaders on LinkedIn and other social media platforms
• Subscribe to key industry newsletters like This Week in Coworking 
• Regularly solicit feedback from members to understand their evolving needs

8. Neglecting technology and automation

Outdated or nonexistent technology can frustrate members and make operations inefficient. Not to mention, overrelying on manual processes and underinvesting in automation can make for more trouble than necessary as a coworking space owner and operator.

No one knows this better than Deanna Hoy, community manager at Q Space. She was able to use Optix Automations to completely transform her role, helping her provide a better experience for members and ultimately help grow the business – without growing the team.

Learn more about Optix Automations →

Tips for integrating technology into your business

• Implement user-friendly tools like coworking software, payment gateways, and automated access control
• Upgrade internet infrastructure to ensure fast and reliable Wi-Fi for all members
• Audit existing processes and systems to understand how automation can be used more effectively

9. Incorrect product mix

One of the most common scenarios we see with new coworking spaces is the wrong mix of products and services for their members. For example, overindexing on open seating areas and underindexing on private offices is likely to lead to less revenue, limiting the growth of your coworking space.

As per the suggestion of many coworking space consultants, you should be able to cover most, if not all of your rent, from private offices alone.

Tips for selecting the right mix of products

• Consider your target audience and what products and services would be most useful to them
• Think about your business model or how your space will make money and develop your product mix around your growth goals
• Embrace an experimental attitude to ensure you are continuing to innovate on what you offer your members

10. Ignoring member feedback

Everything you do is for your community. Failing to listen to members’ needs and concerns can result in dissatisfaction, high turnover, and a damaged reputation in the community. Once you lose the trust of your members, it’s extremely difficult to get it back.

Tips for collecting member feedback

• Set up regular feedback channels, such as surveys, suggestion boxes, or one-on-one meetings
• Act on feedback promptly and communicate changes to show members their voices matter
• Create a member advisory board to provide ongoing input and ideas

Enable your coworking space to thrive

Understanding why coworking spaces fail is crucial to building one that thrives in 2025 and beyond. 

Success in this industry requires more than just desks and Wi-Fi (as so many have been saying for so long) — it hinges on strategic location choices, thorough market research, strong community engagement, and a clear unique value proposition. Not to mention, the courage to lead boldly.

By learning from the common reasons for failure and implementing actionable solutions, you can create a coworking space that not only meets market demands but contributes to the health and well-being of the broader community. 

Discover how Optix can help your coworking space thrive in 2025 →