Here’s an admission: “I was a flexible office broker for 20+ years, and I never did a deal where I forced an operator to realise a loss on a contract. Nor would I ever want to… Nor do I think I could.” (Michael Dubicki, Founder of Flex Engine). There is allure in cheap coworking space deals, but it can be a double-edged sword.

So let’s talk office space discounts…

Every coworking building has a ‘spread’ between their headline price (the RRP, if you like) and a minimum price at which they still achieve a profit.

How close they will get close to the ‘floor’ depends on building occupancy and local market conditions. Occupancy low + competition high = conditions for aggressive discounts from the RRP.

The best coworking brokers have a good handle on these dynamics and use them well.

But here are some facts:

The bigger the discount achieved, the higher the price ramp-up at renewal. Operators need to grow margins over time.

So clients need to think about whether they want to ‘deal hop’ and move every 6 to 12 months or strike a longer-term balance.

Big shouts from brokers about huge discounts achieved are talking about discount from RRP, not discount against average market conditions. But RRP often has little correlation with actual market activity.

So achieving £500 per desk against an RRP of £800 looks great but if the local market is selling at £520…

The best advisors will have a sensible commercial discussion with clients about what to realistically expect, backed by observed conditions at that point in time (and evidence).

And they do what’s best for the client long-term.

You can’t have your cake and eat it. Cheap coworking space does not necessarily equal long-term stability.