Coworking represents the growing integration of flexible workspace solutions within commercial real estate portfolios. For property owners and investors seeking to understand this trend, here’s what you need to know:

  • Definition: Collaborative office-sharing arrangements where individuals or businesses rent workspaces under flexible terms
  • Market Share: Currently accounts for 2% of total US office inventory (59.2M SF across 7,823 locations)
  • Growth Trajectory: Has grown an average of 23% annually since 2010
  • Future Outlook: Expected to represent 30% of all commercial real estate by 2030 (JLL prediction)
  • Revenue Potential: Coworking spaces typically yield 130-165% of traditional market rents

The commercial real estate landscape is evolving rapidly. Traditional office leases? Not what they used to be. Demand for flexible workspaces? Only going up. As remote work and hybrid models become standard practice, property owners and investors are finding that coworking isn’t just a passing trend—it’s a fundamental change of how commercial space is used and monetized.

This shift began well before the pandemic but has accelerated dramatically since 2020. What started as a niche offering for freelancers and startups has evolved into a mainstream asset class that supports businesses of all sizes. From Manhattan (7.5M SF) to Chicago (3.4M SF) to Los Angeles (4M SF), major markets are seeing coworking take an increasingly significant portion of their office inventory.

For property owners facing vacancies or seeking to diversify income streams, coworking presents a compelling opportunity. The flexible office market is projected to grow from $45.24 billion in 2025 to $136.46 billion by 2032, exhibiting a CAGR of 17.08%. This growth is fueled by changing work preferences, corporate demand for flexibility, and the proven productivity benefits—74% of coworkers report being more productive since joining a coworking space.

I’m Matt Morgan, a licensed California Real Estate Salesperson with experience in commercial property specializing in retail and office spaces where coworking CRE solutions have become increasingly vital. Having worked with IPA since 2008, I’ve helped numerous clients steer this evolving landscape to maximize their property potential and adapt to changing market demands.

Why Coworking CRE Is Reshaping Commercial Real Estate

Let’s talk numbers for a moment—they paint quite a picture. Right now, coworking CRE spaces occupy 59.2 million square feet nationwide, making up 2% of all office inventory in the US. What’s truly impressive? This sector has grown at a steady 23% compound annual rate since 2010, weathering economic ups and downs that would have flattened other commercial trends.

Here in Southern California and the Inland Empire, we’re seeing this change firsthand. Building owners embracing coworking CRE solutions are gaining a competitive edge, especially as amenities become increasingly important. The proof is in the paperwork—CBRE research shows that amenity-rich “prime” buildings are securing lease terms averaging 21 months longer than their Class B and C counterparts. That’s nearly two extra years of stability!

From Executive Suites to Enterprise Hubs

The journey of coworking spaces reads almost like a coming-of-age story:

In the beginning (pre-2009), we had the Executive Suites Era—think formal business centers with private offices and shared receptionists, primarily serving traveling executives and small professional firms. These spaces were functional but often lacked personality.

Around 2012, we entered the Freelancer Era, which birthed coworking as most people picture it today—open floor plans, communal tables, and a heavy emphasis on community. This was the avocado toast phase of coworking, if you will, attracting independent workers and scrappy startups.

Since 2016, we’ve been in the Enterprise Adoption phase, where major corporations have finded the benefits of flexible workspace. Interestingly, private offices have made a comeback, but with modern design sensibilities and smart technology integration. What started as a cost-saving measure has evolved into a strategic advantage for talent attraction and operational flexibility.

Operational Models of Coworking CRE

The coworking CRE sector has evolved to encompass several distinct operational approaches:

The open desk model represents the classic coworking arrangement—shared tables and communal workspaces with minimal privacy. While this was the original concept that launched a thousand startups, it now represents a decreasing percentage of the market as privacy concerns have grown.

Currently dominating the market is the private office focus, offering enclosed spaces of various sizes alongside limited shared areas. This format appeals to established businesses seeking flexibility without sacrificing the privacy needed for sensitive conversations and focused work.

The hybrid mix takes a balanced approach with both open desks and private offices, often with phone booths and focus rooms as middle-ground options. This versatile model serves the broadest range of clients and work styles.

Many landlords now partner with coworking operators through management contract approaches rather than traditional leases. These typically involve profit-sharing arrangements (commonly around 30%) that align incentives between property owners and operators.

Each model offers different advantages for property owners. While leasing to a coworking operator provides predictable income with minimal involvement, management contracts offer potentially higher returns for those willing to be more engaged in operations.

At IPA Commercial Real Estate, we’ve helped numerous property owners in the Inland Empire evaluate which model best suits their buildings and investment goals. The right approach depends on your property’s location, layout, and your personal appetite for involvement in operations.

Business Models & Asset Economics

Turning a traditional office space into a vibrant coworking hub isn’t just about adding some cool furniture and fast WiFi. It’s an investment that requires careful planning, but the payoff can be substantial for property owners willing to make the leap.

The upfront investment for converting your space into a coworking CRE destination typically runs between $80-150 per square foot. This might sound steep at first, but let’s break down what you’re paying for: demolition and construction if you’re changing the layout, all that stylish furniture that makes members feel at home, robust technology infrastructure that won’t crash during important Zoom calls, and those inviting common areas where the magic of collaboration happens.

Here’s where it gets interesting – well-run coworking spaces can command a premium of 130-165% above traditional office rents. That’s right – your space could potentially generate significantly more revenue per square foot than a conventional lease. This premium helps offset the higher operational costs and initial investment, making the business case quite compelling.

As a property owner, you’ve got several paths to enter the coworking CRE world:

You could roll up your sleeves and operate it yourself, creating your own branded coworking space. This gives you complete control but requires operational expertise. Alternatively, you might prefer a management contract, where you partner with an experienced operator who runs the space for a fee (typically 10-15% of revenue) plus a share of the profits (commonly around 30%). Many landlords find this strikes the perfect balance between risk and reward.

If you prefer a more hands-off approach, you could simply lease to an established coworking operator or explore a franchise model that provides proven systems and support. Each approach offers different levels of involvement, risk, and potential return.

Conversion Strategies for Landlords

We’ve guided numerous property owners throughout Southern California in changing their spaces, and several approaches have proven particularly effective:

Vacant office reuse is often the easiest entry point – converting empty floors into flexible workspace, perhaps starting with a single floor to test the waters. For retail property owners, retail pop-ups can transform vacant storefronts into coworking hubs, especially in high-foot-traffic areas.

Many landlords find success through white-label partnerships, working with established operators who manage the space under the building’s brand. And for those wanting to minimize risk, phased implementation starting with just 5,000-10,000 square feet allows you to expand based on proven demand.

The ideal candidates for conversion are often well-located Class B buildings that need repositioning to compete with newer properties. By incorporating coworking CRE elements, these buildings can attract tenants seeking both amenities and flexibility without paying premium Class A rents.

In Riverside specifically, we’ve seen strong results when owners convert portions of their buildings to flexible space while maintaining traditional leases elsewhere, creating a hybrid model that captures different market segments and diversifies income streams. This approach has proven particularly effective for Commercial Lease strategies that need to adapt to changing market conditions.

For more insights on how flexible workspaces are reshaping the industry, check out our article on How Are Flexible Workspaces Affecting the Real Estate Industry?

Designing & Operating Spaces Tenants Love

Gone are the days of sterile office cubicles and fluorescent lighting. Today’s coworking CRE spaces blend functionality with hospitality-inspired touches that make members feel both productive and valued. When I walk clients through potential coworking conversions, I emphasize that the physical environment directly impacts both satisfaction and bottom-line results.

The most successful spaces I’ve seen in Riverside and throughout Southern California share some common design elements. Enterprise-grade WiFi isn’t just a nice-to-have—it’s absolutely essential, with redundant systems ensuring members never face connectivity issues. We’re also seeing tremendous response to biophilic design elements like living walls, abundant natural light, and organic materials that bring the outdoors in.

Smart acoustic management makes a tremendous difference—members need to move seamlessly between collaborative conversation and heads-down focus work. Thoughtful zoning of spaces based on noise levels creates natural flow without the need for restrictive rules. And with sustainability becoming increasingly important to tenants, ESG features like energy-efficient systems and wellness-focused amenities aren’t just good for the planet—they’re good for occupancy rates.

The numbers back this up: 74% of coworkers report increased productivity after joining a coworking space. That’s not just marketing hype—it’s the result of intentional design that supports how people actually work.

Amenities That Drive Retention

Member retention is where the real profitability of coworking CRE lies. I always tell property owners that acquiring a new member costs roughly five times more than keeping an existing one, which is why smart amenity selection matters so much.

The coffee bar might seem like a small detail, but I’ve seen spaces transform their occupancy rates by upgrading from basic drip coffee to barista-quality espresso drinks. Phone booths have become non-negotiable—members need private spaces for calls without booking an entire conference room. Wellness rooms that serve as quiet spaces for meditation, prayer, or simply decompressing have become increasingly important as workers seek better work-life balance.

In our Inland Empire properties, outdoor workspaces are particularly valuable given our climate—rooftop decks and patios offer a change of scenery that members love. The key is understanding your specific member demographic and providing amenities that solve their particular pain points rather than copying a generic amenity list.

The Role of Technology & Data

Technology in coworking CRE has evolved from a nice perk to the central nervous system of successful operations. Modern spaces need integrated systems that create a seamless experience from the moment a member books a tour to their daily usage patterns.

Mobile apps for booking desks and meeting rooms have become standard, but the best operators are using these systems to gather invaluable data about how their spaces are actually being used. IoT sensors can track which areas see the most traffic, which meeting rooms sit empty, and even which times of day have peak demand—allowing for dynamic pricing and space optimization.

Community & Networking Programming

The secret sauce of successful coworking CRE spaces isn’t the furniture or the technology—it’s the community. I’ve seen beautifully designed spaces fail because they neglected programming, while more modest spaces thrive because of the connections they foster.

Effective community building starts with understanding who your members are and what they need. A space filled with tech startups needs different programming than one serving established professional service firms. A thoughtful events calendar might include a mix of casual networking, structured learning opportunities, and celebrations that build relationships beyond transactional business connections.

Here in Riverside, we’ve seen remarkable success with spaces that connect with local universities and industry clusters. Peer learning opportunities where members share expertise create value that transcends the physical space. Mentorship programs that connect experienced professionals with emerging talent build loyalty that keeps members renewing month after month.

The community aspect directly impacts the bottom line—members who form meaningful professional connections within a space are significantly less likely to leave when their agreement terms end. At IPA Commercial Real Estate, we help property owners develop programming strategies that create these sticky communities, ensuring higher retention and more stable income streams.

The legal framework for coworking CRE differs significantly from traditional office leasing, creating potential pitfalls for the unwary. Rather than leases, most operators use membership agreements with license language to maintain flexibility. This distinction has important legal implications that property owners must understand.

Zoning compliance often becomes a sticking point. I’ve worked with clients in Riverside who finded their perfect location was zoned in ways that complicated their coworking plans. Building codes can also present challenges, particularly regarding occupancy calculations that may differ for flexible workspace versus traditional offices.

Insurance needs expand significantly with coworking. The public access areas, frequent events, and higher density of users create exposures that standard commercial policies may not adequately cover. And ADA considerations become more complex when designing spaces meant to be used in multiple configurations.

Proper Commercial Property Management becomes especially important with coworking spaces, as the operational complexity and regulatory requirements demand more specialized oversight than traditional office buildings.

Frequently Asked Questions about Coworking in CRE

In my years working with property owners across Riverside and the Inland Empire, I’ve noticed certain questions come up repeatedly when discussing coworking CRE solutions. Let me share the most common ones—and what you really need to know about each:

What returns can landlords expect?

“Will this actually make me more money than traditional leasing?” It’s the question on every property owner’s mind, and for good reason.

The short answer: yes, but with important nuances. Well-run coworking spaces typically generate rental yields between 130% and 165% of traditional market rents on a per-square-foot basis. That premium looks attractive on paper, but remember it comes with higher operational costs and upfront investments.

Most spaces reach profitability within 18-36 months, assuming you’re keeping a close eye on the key metrics. You’ll want to maintain occupancy above 70-75%, aim for revenue per square foot at 2-3 times traditional office rates, and carefully balance what you spend acquiring members against their lifetime value.

For landlords who prefer management contracts over direct operation (which many do), profit-sharing typically kicks in once the space exceeds operational break-even. The standard arrangement gives landlords 70% of profits while the operator takes 30%—a fair split considering the specialized expertise operators bring to the table.

How big should a coworking space be?

“Is my building too small—or too large—for coworking?” This question comes up in almost every initial consultation.

In my experience working throughout Southern California, 5,000 square feet represents the minimum viable size for achieving operational efficiency. The sweet spot for most buildings is converting about 15-25% of the total gross leasable area to flexible workspace.

Many of our clients find success starting smaller with a clear plan to scale. In multi-tenant buildings, converting an entire floor makes the most operational sense—it creates a cohesive community and simplifies access control. For retail conversions in high-visibility locations, you can sometimes make a smaller footprint work (around 3,000-4,000 SF), especially if the layout offers natural divisions for different workspace types.

How do I start converting my building?

“This sounds promising, but where do I even begin?” It’s completely normal to feel overwhelmed by the process.

Rather than diving in headfirst, I always recommend a methodical, phased approach:

First, conduct a thorough feasibility study analyzing market demand, competitive landscape, and your building’s suitability for conversion. This step alone saves our clients from costly missteps.

Next, determine your operational model—will you self-operate, partner with a management company, or lease to an established operator? Each has distinct risk-reward profiles.

Then develop a thoughtful design that balances different workspace types while optimizing revenue potential. The right mix of open desks, private offices, and meeting spaces can dramatically impact your financial outcomes.

Finally, implement in phases. Start with a defined portion of your building to test the concept before expanding. This approach limits your downside risk while preserving upside potential.

At IPA Commercial Real Estate, we walk alongside our clients through each step of this journey. Our deep knowledge of the Southern California market helps us craft strategies custom to local conditions and demand patterns.

The coworking CRE landscape continues evolving, but one thing remains constant: property owners who approach this opportunity with clear eyes and expert guidance position themselves to thrive in commercial real estate’s changing future.

Why Choose IPA Commercial Real Estate?

At IPA Commercial Real Estate, we bring deep experience in the Riverside, Inland Empire, and broader Southern California markets to help property owners steer this evolution. Our team understands both traditional commercial real estate dynamics and the unique requirements of successful flexible workspace operations.

The coworking revolution isn’t just changing where people work—it’s reshaping the fundamental economics of commercial real estate. From lease structures to building design to operational models, every aspect of our industry is evolving to meet new expectations for flexibility, community, and experience.

For property owners, this shift represents an unprecedented opportunity to create spaces that better serve tomorrow’s tenants while generating stronger returns. Those who recognize and adapt to these changes won’t just weather the storm—they’ll harness its energy to propel their portfolios forward.

For more information about how we can help you evaluate and implement coworking CRE solutions for your property, contact our team or visit our locations page to find the office nearest you.