Lessons Learned from Failed Coworking Spaces and How to Avoid Their Mistakes

I’ve watched coworking spaces launch with excitement, only to close within a year.

Most fail because they use weak business models, pick poor locations, and lack clear financial planning.

These mistakes are common, but you can avoid them if you know what to watch for.

When I researched stories of closures, from small hubs to big names like WeWork, I noticed the same patterns.

Some spaces couldn’t attract members, others failed to adapt to changing work trends, and many underestimated how hard it is to build a strong community.

I’ll share lessons I’ve learned from these failures.

You’ll learn how to manage finances wisely, create a space people want to return to, and stay flexible as the market shifts.

Understanding Why Coworking Spaces Fail

Many coworking spaces close because they misjudge costs, misunderstand their market, or can’t stand out from competitors.

Usually, several operational, financial, and strategic issues combine to make the coworking model unsustainable.

Common Pitfalls in the Coworking Model

One of the biggest mistakes is failing to define a clear value proposition.

If a coworking space offers the same desks, Wi-Fi, and coffee as everyone else, members have no reason to stay loyal.

Some spaces ignore community building.

According to Optix, strong member engagement is key to retention.

Without events, networking, or personal connections, the space feels generic.

Poor market research can also hurt new ventures.

Opening in a location without enough freelancers, startups, or remote workers means low occupancy from day one.

Common pitfalls include:

• No clear niche or target audience
• Weak community engagement
• Inadequate understanding of local demand

Challenges with Office Space and Overheads

Office space is the largest expense in the coworking model.

Long leases, high rents, and costly build-outs can quickly drain capital.

If you rent a space too large for your member base, the unused square footage drains your budget.

If the space is too small, you limit growth and revenue.

Utilities, cleaning, and maintenance often cost more than expected.

Furniture, equipment, and software subscriptions add to monthly overheads.

Key cost drivers:

Market Saturation and Competition

In some cities, coworking spaces open faster than demand grows.

This market saturation forces operators to lower prices or offer expensive perks to attract members.

When a new space opens nearby with better amenities or a more vibrant community, members may switch.

Officernd notes that without a unique offer, it’s hard to compete.

Competing only on price is risky.

Successful spaces focus on specialization—serving a certain profession, industry, or work style better than others.

Even in competitive markets, spaces survive by delivering consistent value and building strong member loyalty.

Financial Lessons from Failed Coworking Spaces

I’ve watched coworking spaces close because their money problems piled up too quickly.

Unstable income, expensive daily operations, and risky lease agreements often cause these failures.

Revenue Instability and Cash Flow Issues

Unpredictable revenue makes it hard for coworking spaces to survive.

Many rely too much on month-to-month memberships without enough long-term contracts to guarantee steady income.

Even a small drop in members can create sudden cash flow gaps.

During slow seasons, rent and utilities still need to be paid, but income falls short.

Successful operators diversify revenue.

They add event hosting, private office rentals, or partner with local businesses.

Without these extra income streams, the business becomes too dependent on desk rentals.

A Forbes analysis highlights the lack of consistent profit across the industry.

A coworking space needs more than just a full room to stay financially healthy.

High Operational Costs

Running a coworking space is expensive.

Owners often underestimate costs beyond rent—cleaning, internet, equipment repairs, and staff salaries add up fast.

Some spaces overspend on premium furniture or high-end amenities before building a stable customer base.

This leaves them with high fixed costs and no buffer when revenue drops.

A simple cost breakdown might look like this:

Keeping costs under control is key.

Starting lean and upgrading later can prevent the financial strain that sinks many spaces.

Short-Term Commitments and Lease Risks

A big mismatch often happens between short-term member contracts and long-term office leases.

A landlord might require a 5-year commitment, but members can leave with 30 days’ notice.

If several members leave at once, the space still owes years of rent.

Optix shows that overcommitting on space leads to quick closures.

Aligning lease terms with expected membership stability is critical.

Some operators avoid this risk by subleasing smaller areas first or negotiating flexible lease clauses.

Community Building and Member Engagement

I’ve seen coworking spaces fail when they focus too much on the physical setup and not enough on people.

The success of a space often depends on how well members connect, feel supported, and see value beyond just a desk.

The Importance of Fostering Community

When I managed a shared workspace, I learned that community needs consistent effort.

I introduced members to each other, especially those with similar skills or interests.

Hosting small, regular events worked better than large, rare ones.

Weekly coffee meetups or skill-sharing sessions encouraged casual conversations.

Over time, members collaborated on projects and referred clients to each other.

Creating shared goals also helped.

For example, a group challenge to complete a portfolio update by month’s end gave people a reason to check in and offer help.

Spaces that focus on intentional connection, like those in thriving coworking communities, often see higher retention.

Overcoming Isolation Among Freelancers

Many freelancers join coworking spaces to escape working alone at home.

But if no one engages with them, they can still feel isolated.

I greeted new members by name and introduced them to at least two others on their first day.

Seating arrangements matter—putting people in clusters instead of rows encouraged more interaction.

I set up a “community table” where anyone could sit to chat or work near others.

For those who preferred quiet, I checked in occasionally.

Even a quick “How’s your week going?” made a difference.

Research on coworking culture shows fostering belonging is as important as providing physical space.

Customer Service and Member Experience

Good customer service in a coworking space goes beyond fixing Wi-Fi.

I treated every member interaction as a chance to improve their day.

That meant responding quickly to requests, remembering personal details, and following up on problems.

I kept a simple log of member feedback and acted on it.

If someone mentioned the coffee machine was slow, I had it serviced within a day.

Small actions like these built trust.

Spaces that fail often ignore the experience side of membership.

People stay where they feel valued and supported, not just where they rent a desk.

My focus on service kept members happy and more likely to renew.

Adapting to Change: Innovation and Flexibility

Coworking spaces survive best when they keep pace with shifting work trends and member expectations.

The ability to introduce new ideas, adjust services, and act on feedback can make the difference between steady growth and decline.

Embracing Innovation in the Workplace

When I ran my first coworking space, I saw how quickly the workplace changed.

Remote work, hybrid schedules, and digital tools kept evolving.

If I didn’t keep up, I risked losing relevance.

I tested small innovations instead of overhauling everything at once.

For example, I piloted flexible desk layouts and upgraded meeting rooms with better video conferencing gear.

This let me see what worked before making bigger investments.

I watched how other operators adapted.

Some of the most profitable spaces, according to 2025 coworking trends, refine their model over years.

Innovation isn’t a one-time event—it’s a steady process.

Responding to Member Needs

I learned early that guessing what members want rarely works. So, I asked directly.

Short surveys, casual chats, and tracking how people used the space gave me clear signals. When members said they needed quieter areas, I added phone booths and soundproof pods.

When they asked for more community events, I scheduled skill-sharing lunches and small networking meetups. Adapting quickly kept members engaged and reduced turnover.

Ignoring these needs often leads to empty desks and lost revenue.

Learning from Feedback and Mistakes

I’ve made mistakes—some small, some costly. At first, I saw them as setbacks.

Now, I treat them as data points. If a new service flops, I ask why and then adjust or drop it.

I also encourage staff to share what isn’t working without fear. This approach helps us learn from failure and improve.

By acting on feedback, I avoid repeating errors. Over time, I’ve turned past failures into practical improvements that members notice and value.

Impact of the Pandemic and Remote Work Trends

I saw how quickly shared offices emptied when lockdowns began. Many workers moved to home offices, and companies started rethinking the need for physical space.

These shifts reshaped demand and changed how spaces operate. The pandemic pushed new ways of working into the mainstream.

How the Pandemic Changed Coworking Spaces

When the pandemic hit, health guidelines made shared desks and communal areas risky. Some coworking spaces closed for months, while others operated at reduced capacity.

Operators added sanitation stations, spaced out seating, and limited events. This increased costs while revenue dropped.

Some spaces offered short-term private offices instead of open desks. Others created flexible memberships so people could come in only a few days a month.

Still, many locations couldn’t survive the long closures. The sudden drop in members, combined with rent obligations, caused permanent shutdowns.

Rise of Remote Work and Hybrid Models

Remote work adoption jumped almost overnight. In 2019, only about 6.5% of private-sector employees worked primarily from home.

By 2020, that number surged, creating what the Bureau of Labor Statistics called a massive experiment in full-time remote work.

Some companies embraced hybrid models, where employees split time between home and the office. This reduced the need for large, permanent workspaces.

Coworking spaces began marketing themselves as a third place—not home, not the corporate office—where remote workers could focus a few days a week.

Membership plans became more flexible, and day passes grew in popularity. Spaces that adapted to this shift found new customers among freelancers, startups, and even corporate teams.

Digitalization and New Norms

The pandemic sped up digital transformation. Coworking spaces adopted contactless check-ins, online booking systems, and virtual community events.

Tools like Zoom and Slack replaced many in-person networking opportunities. Some spaces offered virtual memberships, giving access to online workshops and job boards without physical desk use.

These changes built resilience. Spaces could still engage members during lockdowns and maintain a sense of community.

Now, digital tools are part of the standard coworking experience. Even in-person members expect reliable video conferencing rooms, strong Wi-Fi, and tech support as part of their plan.

Key Takeaways for Future Coworking Success

A coworking space thrives when it has a clear plan for making money, listens to its members, and adapts to changes quickly.

Building Sustainable Business Models

I make sure my coworking model has more than one way to earn revenue. Relying only on desk rentals can be risky if demand drops.

Adding meeting room rentals, event hosting, or virtual memberships helps keep income steady. I also keep my operating costs in check.

Rent, utilities, and staffing should stay in balance with my projected income. I avoid overestimating demand, a mistake that has led to many coworking space failures.

To plan ahead, I track cash flow monthly. This helps me spot trouble early and adjust before it’s too late.

A sustainable coworking business isn’t about fast growth—it’s about steady, reliable income that covers expenses and leaves room for reinvestment.

Key revenue ideas:

• Private office rentals
• Event space bookings
• Day passes and flexible plans
• Virtual office services

Prioritizing Member Needs and Flexibility

Members stay longer when they feel the space works for them. That means giving them options.

Flexible memberships, extended hours, and different workspace setups make it easier for people to fit coworking into their lives. I talk to members often.

Surveys, casual chats, and feedback boxes help me understand what’s working and what needs to change. If members want more phone booths or faster internet, I try to respond quickly.

Coworking is about community as much as space. I host small networking events and skill-sharing sessions so members connect with each other.

When people feel part of a community, they’re less likely to leave for another space.

Continuous Improvement and Agility

I treat my coworking space as a work in progress. I regularly review how people use the space and make changes when something isn’t working.

Sometimes, I rearrange furniture or update software. I also add new services when needed.

Market trends can change quickly. Remote work patterns, local competition, and real estate costs often shift in just a few months.

I read industry reports like these coworking studies to stay informed. This helps me adjust before problems get bigger.

I test new ideas on a small scale. For example, I might try a new membership tier for a month before offering it to everyone.

This approach lets me see what works without taking big risks.