The coworking boom that started in the mid-2010s created more supply than sustainable demand. Every major city now has multiple coworking brands plus dozens of independent spaces, all competing for the same pool of freelancers, remote workers, and small companies. The math was never going to work long-term, and we’re seeing the correction now.

WeWork’s collapse was the visible spectacular failure, but it wasn’t an outlier—it was a preview. The business model that seemed revolutionary was just commercial real estate with thinner margins and higher operational costs. When growth slowed and the economics got scrutinized, the problems became obvious.

The fundamental challenge is that coworking spaces have high fixed costs—rent, furniture, utilities, staff—and relatively low revenue per square meter compared to traditional office leases. The model only works with high occupancy rates, and high occupancy is hard to maintain when there are five other coworking options within walking distance.

Price competition has driven down what spaces can charge. In most cities, coworking day rates and monthly memberships have been flat or declining for years while commercial rents have increased. That’s a squeeze that can’t continue indefinitely.

The pandemic initially seemed like it might boost coworking by pushing more people toward remote work who needed workspace outside their homes. Some spaces did see increased demand in 2023-2024. But that surge has faded as hybrid work normalized and people figured out sustainable home office setups.

What we’re left with is a market where demand hasn’t grown enough to support the supply that was built anticipating continued growth. Spaces that opened in 2019-2021 betting on post-pandemic remote work booms are now struggling to fill desks.

Independent coworking spaces are getting hit hardest. The larger chains have economies of scale, brand recognition, and access to capital. Independents often have better community and more character, but they can’t compete on price or amenities when facing chains that can afford to lose money on individual locations.

There have been a lot of quiet closures. Spaces that just don’t renew their lease when it’s up, or that transition to private offices only, or that get acquired by competitors who shut down the duplicate location. These don’t make headlines like WeWork, but they’re happening steadily.

The survivors are increasingly specializing. General coworking—desks and wifi for whoever wants them—is oversupplied. Spaces focusing on specific communities (creatives, tech startups, healthcare entrepreneurs) or offering specialized resources (podcast studios, maker spaces, commercial kitchens) have better differentiation.

But specialization limits your addressable market. A general coworking space can serve anyone. A biotech coworking lab only serves biotech companies. There might be enough demand to sustain one specialized space in a city, but probably not three.

Location matters enormously. Coworking spaces in prime downtown locations are competing with expensive offices for people who could just work from home. Spaces in more affordable neighborhoods near residential areas serve people who want separation from home without a downtown commute. The latter seems more sustainable.

The corporate coworking model—companies buying memberships for distributed teams instead of maintaining offices—was supposed to be a major growth driver. It’s happening, but not at the scale that was projected. Most companies either commit to offices or go fully remote; the hybrid model using coworking is a smaller niche.

Some organizations are implementing strategies with custom AI solutions to better forecast workplace demand and optimize space utilization, but the fundamental oversupply issue remains.

Membership tier complexity has gotten absurd. Virtual memberships, mail-only memberships, day passes, part-time desks, full-time desks, dedicated desks, private offices, meeting room credits, evening-only access—the permutations are endless. This complexity creates operational overhead and confusion without clearly increasing revenue.

Community was always the differentiator coworking spaces emphasized over traditional offices. But community is hard to maintain with high turnover, and it’s hard to monetize directly. People value community right up until a competitor offers the same desk for $50 less per month.

Events and programming are expensive to run and mostly serve as marketing rather than revenue generators. They create community and differentiate the space, but hosting evening networking events or lunch-and-learns costs money and staff time.

The amenities arms race has also escalated costs. Spaces compete on free coffee, snacks, beer on tap, standing desks, ergonomic chairs, phone booths, nap rooms, showers, bike storage. These amenities cost money to provide but are increasingly expected rather than valued as premium offerings.

Real estate developers who built coworking into mixed-use developments are rethinking those allocations. What seemed like a forward-thinking amenity in 2019 now looks like space that could be better used for residential units or traditional commercial tenants with longer lease terms and lower management overhead.

The technology platforms built for coworking management—booking systems, access control, community apps—are themselves oversupplied. There are dozens of software vendors serving a market that’s shrinking and consolidating. We’ll see collapse among those vendors too.

Conversion of struggling coworking spaces to other uses is starting to happen. Some become traditional office spaces with conventional leases. Some get chopped up into smaller private suites. Some get converted to residential if zoning allows. The coworking buildout can be undone, but it’s expensive.

Landlords who relied on coworking tenants to fill space are getting nervous. Coworking operators often negotiated favorable terms when landlords were eager to fill vacant floors. As those leases come up for renewal, the negotiating positions have flipped. Landlords have more leverage, operators have less.

Some coworking chains are shifting to management agreements rather than direct leases—they operate the space for the landlord and take a percentage of revenue instead of being the tenant. This shifts risk to the landlord but reduces their own exposure. It’s a sign they’re getting more cautious.

The macro environment isn’t helping. Higher interest rates have cooled startup funding, which was a major source of coworking demand. Budget-conscious companies are cutting coworking memberships. Freelancers feeling economic pressure are working from home instead of paying for desks.

There will still be coworking spaces. The model serves a real need for some segment of the workforce. But the idea that coworking would replace traditional offices for a large portion of workers has proven wrong, and the market is correcting accordingly.

What we’re probably heading toward is a smaller, more stable coworking sector. Fewer spaces, more specialized, serving specific niches rather than trying to be everything to everyone. The general-purpose commodity coworking space competing purely on location and price is the least viable model.

The consolidation will be good for the survivors. Less competition means they can charge sustainable rates and maintain higher occupancy. But getting to that equilibrium involves a lot of pain for spaces that won’t survive the shakeout.

If you’re currently relying on a coworking space, it’s worth having a backup plan in case your space closes or gets acquired and changes significantly. If you’re thinking about starting or investing in a coworking space, the market conditions are probably the worst they’ve been since the concept emerged.

The coworking boom created real value—many people had better work experiences because these spaces existed. But it also created unsustainable oversupply based on overly optimistic projections about the future of work. We’re now in the hangover phase where reality and expectations are painfully realigning.