Coworking vs. Traditional Lease: Understanding the Total Cost of Occupancy

As people come in to tour here at The Village Workspace, we often hear questions around how to compare coworking or shared workspace to a traditional leases or subleases for office space. While it’s true that coworking can appear more expensive when you are comparing the size of a single office to a suite somewhere in another building. We know that it can be hard to understand all that goes into the actual comparison and we want to provide a complete picture of the costs involved. That’s where the concept of Total Cost of Occupancy (TCO) comes in. Some call it TOC or Total Occupancy Cost, but we will refer to it as TCO.

What is Total Cost of Occupancy (TCO)?

TCO is a financial metric that takes into account all the expenses associated with occupying office space, beyond just the rent. It’s a comprehensive way to understand the true cost of a workspace over a given period, often a year, and it’s a valuable tool for making informed decisions about your office space.

The Initial Cost Comparison

When comparing coworking to a traditional sublease, many people focus solely on the initial costs—such as the base rent and security deposit. At first glance, traditional leases may appear to be cheaper because they have lower initial rent costs. However, TCO looks beyond these initial figures. There have been studies showing coworking to be much more affordable than leasing a space, not to mention the flexibility a shared or coworking space offers. 

Calculating TCO for Coworking and traditional lease

To truly understand the affordability of a workspace, it’s essential to calculate the TCO for both coworking and lease options. Let’s break it down:

For Coworking:

Base Membership Fee
Included Amenities (meeting and training rooms, utilities including internet, cleaning, fitness center, wellness classes, etc.)
Transportation Savings (central location)
Flexibility (short-term leases and memberships)
Furniture and Equipment (often included)

For Traditional Lease:

Base Rent
Operating Expenses (utilities, maintenance, property taxes)
Furniture and Equipment (often not included)
Transportation Costs (if the location is distant)
Hidden Costs and Flexibility to Increase or Decrease Size Needed

Leases can come with hidden costs, such as maintenance and utilities, which can add up over time. Additionally, long-term commitments in traditional leases may lack the flexibility needed for your evolving business. Coworking spaces often include these costs in their fees and provide short-term agreements with built-in flexibility.

Transportation and Location Considerations

Think about the location of your office space. A central coworking location can reduce transportation costs for your employees and make your business more accessible to clients and partners. This convenience can significantly impact your TCO.

Using TCO as a Decision-Making Tool

We encourage our customers to use TCO as a tool for decision-making. When comparing coworking to traditional leases, it’s not just about cost but also about value. Coworking spaces like The Village Workspace offer an array of amenities, events that offer education and employee engagement, a collaborative environment, and flexibility that can be worth the investment.

At The Village Workspace, we believe in transparency and providing you with all the information you need to make an informed choice. While coworking may appear more expensive initially, we hope this explanation of TCO has shed light on the true cost of occupancy and the value that coworking can bring to your business.

If you have any questions or would like to discuss TCO further, please don’t hesitate to reach out. We’re here to help you find the workspace solution that best fits your needs and budget.

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