Remote work has become a prominent trend thanks to government measures during the pandemic. That has fed considerable growth for co-working space demand, and many workers are likely to prefer this method above traditional work shifts.
While this has been problematic for traditional property managers, it can be a field of opportunities for ambitious companies. However, it still requires a considerable shift in mentality for how firms approach leasing office space.
Charging for co-working spaces is one of those considerations. Working with a professional leadership and strategy service can help you tackle this venture successfully. Assetsoft offers advisory and outsourcing solutions that helps you get a step closer to success. Our team can help you find out the right business arrangement for you, and help you manage your finances and documentation easily.
Co-working and traditional leases: What’s the difference?
Approaching co-working arrangements requires a different mindset than traditional lease arrangements. It would be best to consider what companies and workers need and accommodate your pricing structure to these needs.
An office space offers fantastic benefits for companies allowing them exclusive control over the space, which means privacy and personalization. Fixed terms are also traditionally advantageous, but the pandemic changed this.
Co-working spaces are more effective when flexibility is the priority. With remote work, this becomes more noticeable. Co-working arrangements allow individual workers and companies to allocate the best space for their needs.
Agreements are also more versatile. It can grow with the company, allowing for more space and making it more scalable. It can also be more cost-efficient for many businesses.
How do co-working spaces work?
Co-working allows freelancers and remote employees to access an office whenever they need it. Companies and individuals can pay a fee to access the same experience and benefits they'd get from traditional office space without the commitment to abide by shifts and other responsibilities.
How can co-working owners charge for their space?
Co-working providers often charge using membership structures and single-time fees. Depending on how often people will use the space, they can choose different pricing structures.
The priority should be to clarify what people get for their money. It would be best to establish when they have to pay and what entitlements they gain: equipment, software, space, and other amenities.
Can we consider co-working rent as a lease agreement?
We can compare co-working arrangements to short-term leases, yet the reality is more complicated. Especially for accounting purposes, co-working can challenge a company's versatility and its interpretation of accounting standards.
A co-working arrangement can be considered a lease depending on how it falls within the standards' scope. Why is that important? It'll affect how the company can record these transactions in their balance sheet.
Getting technical
A lease agreement provides entities with the right to use certain assets and spaces for a period in exchange for something. While this could mean vehicles or tools, real estate focuses on space. So, a co-working agreement could sound a lot like a lease.
However, traditional co-working arrangements aren't considered as a lease for accounting purposes. That's because short-term leases lasting for less than 12 months are usually exempt from a company's balance sheet—as long as the lessee agrees to it.
Different approaches to co-working
On the other hand, companies can take a different approach to co-working. The standard method is to allow individuals and small firms to use the space as they require. It makes it more challenging for accounting purposes because of the grey area around its eligibility as short-term leases.
Enterprise arrangements allow companies to acquire personalized pricing plans and tailor the amenities to their demands. That often means permission to customize the space, making it easier to consider co-working as a lease agreement.
Accounting for co-working
For most standards, a renewal option is necessary to consider the agreement as a lease. For instance, a year's rent for co-working space with another year's renewal option can make it into the balance sheet as a two-year lease term.
That approach could make it a long-term lease, but shorter terms can also be accounted for as a lease agreement. Including multiple renewal options—all of them being short-term or automatic renewals—can turn flexible agreements eligible for accounting logs. You can talk to if you’re looking for reliable accounting outsourcing services.
How can you come up with a suitable pricing structure?
There isn't only one way to charge for your co-working space. You'll need to think about your needs and customers to come up with the proper structure. For instance, you might want to charge for a "full package" including all amenities or an introductory fee with the option to add more benefits.
Not all companies benefit from the same approach, so you have to keep several variables in mind. We can point out three main factors that can play a role in how you charge.
1. Considering your major costs
Naturally, the most significant factor behind your pricing is how much it costs to maintain your space. Monthly costs for keeping a co-working space can oscillate around the $20,000 mark, so profiting is the first step.
The first step is to measure your maintenance expenses and how many resources your clients use. Every benefit—Wi-Fi, cafes, entertainment options, software, and more—should pay for itself with a few clients as possible.
2. Think about your co-working type
You can take multiple approaches to co-working plans. You can have clients share their desks (hot desking) or offer permanent space for individuals. The same holds for how many people and offices you can hold.
Additionally, you have to consider enterprise options. Charging for these plans depends on the company. Typically, a large firm makes it easier to cover your expenses, but you have to clarify what they’ll have access to and how much it’ll cost you to provide these benefits.
3. Assess your "benefits"
Speaking of benefits, you must also decide what you want to include in the “standard” membership for your co-working. For instance, desks and internet access are often part of any agreement. Other features can come as “add-ons” to the original price.
Consider printers - many workers enjoy the ability to print their documents without leaving their offices, but it's not always necessary. You can charge extra for access to other amenities—like snacks, beverages, and entertainment options.
Manage your co-working spaces finances the smart way
Whether your business is using Yardi, MRI, UiPath or other RPA tools, your team needs to collaborate easily. Assetsoft can help you choose the right ERP for you, so you can streamline tasks and work better.
Want to know how the right ERP choice can help boost business productivity for your business? Contact us today!