Analytics
Coworking or Class B Business Center: Challenges, Prospects, Efficiency
Hello, friends and colleagues! Today, I want to share my thoughts on what's better: investing in coworking spaces or in Class B business centers. These two types of commercial real estate have been actively developing in recent years, each with its own features, prospects, and pitfalls. We'll analyze the data, look at global trends, and make future projections to help you make an informed decision.
Global Statistics on the Area and Rent of Coworking Spaces and Business Centers
Let’s start with a review of global data on the volume of coworking spaces and Class A and B business centers over the past five years. It's important to note that the demand for flexible office spaces has grown significantly in recent years, making coworking spaces a primary alternative to traditional offices.
Growth in Space
  • Western Europe: In countries like the UK, Germany, and France, coworking spaces have taken a leading position in expanding areas. In London alone, over 200,000 square meters of new coworking spaces were added from 2019 to 2023. Berlin also saw a sharp increase, especially in tech districts.

  • Eastern Europe: Here, the growth is more moderate but steady. In Warsaw, about 50,000 square meters of coworking spaces were added over the same period, driven by the growth of startups and tech companies seeking more economical solutions.

  • UAE: In Dubai and Abu Dhabi, the coworking market has grown by 7.46% per year, supported by government initiatives aimed at attracting startups and small businesses.
Rent Dynamics
Coworking Spaces

The cost of renting a workstation in coworking spaces has

significantly increased over the past five years:


  • London: $600 per month (up from $400 in 2019)
  • Berlin: $400 per month (up from $280 in 2019)
  • Dubai: $500 per month (up from $300 in 2019)
  • Warsaw: $350 per month (up from $200 in 2019)

This increase confirms high demand for flexible office solution

. Numerous startups and small businesses prefer coworking spaces

for their flexibility and cost-saving potential.

Class A and B Business Centers

Traditional office spaces also experienced some changes:


  • Class A business centers in London remained stable, with rent around $110 per м² monthly.
  • Class B business centers in Eastern Europe showed moderate rent growth, such as in Warsaw, where prices rose from $15 to $20 per м²
  • In the UAE, Class B business center rent varies between $15 and $25, with demand driven by small companies wanting proximity to business districts without high costs.
Trend Away from Traditional Offices
One of the most significant trends in recent years is the widespread departure from traditional offices. The COVID-19 pandemic pushed businesses to shift to remote work, and many companies have either abandoned traditional offices or significantly reduced their leased spaces. Major corporations such as Twitter and Shopify have partially or completely moved away from office spaces, and this trend is continuing to evolve.

Coworking spaces benefited from this shift, providing businesses with flexibility and the possibility of short-term leases. Class B business centers also attracted attention from those seeking traditional office spaces but wanting to reduce costs and avoid long-term contracts.
CASES
Case #1: Investment Five Years Ago
Now, the most interesting part! Let’s imagine I invested $5 million five years ago. One scenario: purchasing a space and converting it into a coworking area. Another scenario: buying a Class B business center and leasing out offices.
  • -1-
    Coworking Space
    At the time of purchase, I acquired a spacious property in central Warsaw and set up 100 workstations. The rent for one station was $300 per month with an 85% occupancy rate, bringing in $25,500 monthly. Maintenance and marketing costs were about $8,000, resulting in a net income of $17,500. Over five years, this brought in around $1,050,000, and with rising rates and demand, the income could have grown further.
  • -2-
    Class B Business Center
    For the same amount, I purchased an office building on the outskirts with a total area of 2,000 square meters. The rent rate was $15 per square meter, and 80% of the building was occupied, bringing in $24,000 monthly. After $4,000 for utilities and maintenance, the net income was $20,000. Over five years, the income totaled $1,200,000.
The results show that the Class B business center was slightly more stable, but the flexibility and potential for rate increases made coworking a promising alternative.
Case #2: Investment in 2024
Now, let’s imagine we have $5 million to invest today. What’s the best choice?
  • -1-
    Coworking Space
    Currently, rental rates in coworking spaces are higher than five years ago, but demand remains steady. Investment in such a project would require spending on renovations, furniture, and equipment, but the prospects are attractive due to flexibility and the growing popularity of remote work.
  • -2-
    Class B Business Center
    Traditional offices are still relevant, but demand is decreasing. Companies still need offices but often on a smaller scale. On the other hand, such buildings can be upgraded and offered at higher rental rates.
Optimal Investment Amounts for Market Entry
  • -1-
    Coworking Space
    Entering the coworking market requires between $1 and $5 million, depending on location and scope of work. Major expenses include leasing the property, renovations, furniture, and technology. In Eastern Europe, entry can be achieved with a smaller amount, while Western Europe and the UAE require significantly more to meet premium market standards.
  • -2-
    Class B Business Center
    Investment in purchasing and upgrading a Class B business center typically ranges from $5 to $15 million. The main costs include purchasing the building, renovations, and maintaining infrastructure. Unlike coworking spaces, these require long-term investments as rental income flows throughout the lease term.
Nuances and Pitfalls in the Coworking Business
  1. Location Matters. As with any real estate, choose locations with high foot traffic and good transport accessibility. The closer to the center, the better.
  2. Flexibility and Adaptability. Successful coworking spaces offer not only workspaces but also meeting rooms, relaxation areas, coffee bars, and even mini-offices. The more options, the broader the client base.
  3. Technology. Convenient booking systems, fast support, and quality equipment attract clients. Don’t overlook this.
  4. Marketing and Community. Build a brand and create a community. Clients come not only for a workspace but also for the atmosphere and networking opportunities.
  5. Rapidly Changing Client Demands. Trends change quickly, and you must be ready to adapt to new market demands. Flexibility in leasing and offering additional services can play a key role in retaining clients.
Conclusion: Coworking vs. Class B Business Centers
So, which one to choose? The answer depends on your strategy and the level of risk you’re willing to take. Coworking spaces offer flexibility and potentially high returns but require active management and marketing. Class B business centers are more stable but may become less profitable if demand for traditional offices declines.

The future undoubtedly belongs to flexibility, adaptability, and a tech-driven approach. I hope my insights and examples help you make the right decision and succeed in the world of commercial real estate.