Pricing an office “a little higher to see what happens” feels harmless, but it isn’t. In coworking, where offices are typically month-to-month and churn is normal, every empty room carries a cost…and that cost compounds faster than most coworking owners realize. Let’s name this concept:
The Vacancy Penalty
The Vacany Penalty is the hidden monthly loss you incur by holding out for a higher price. If a $1,200 office sits empty even one month, you’ve “lost” $1,200…which means your actual breakeven rent is now lower than you think. Hear me out.
Put simply: An empty office is worth $0, and $0 never beats a slightly lower rate that might be more accessible to potential members - $1,100.
Let’s walk through it with some real numbers. Take a private office you think should rent for $1,200. Someone comes along and offers $1,100. You say no, because you’re confident someone will eventually pay full price.
Fine, but here’s the penalty:
If the office sits empty for one month, you made $0 for that month.
Worse than that, imagine a -$1,200 mark on the balance sheet of that room.
If you had taken $1,100, you’d at least be $1,100 ahead.
All of this sounds very surface-level and obvious…but let’s not miss the point. After just one month of vacancy, the financially optimal price - based on the real revenue now in play - is no longer $1,200. It’s $1,100. Because that extra $100 premium you were holding out for has been burnt by letting that room sit empty for the month.
Now take it one step further. If it sits empty for two months:
Revenue lost: $2,400
If someone had been paying $1,100 for two months: $2,200 earned.
At this hypothetical $2,000 mark, even $1,000/mo for that office would have been the optimal move.
Imagine this at scale, or in the context of a newer space. Imagine having 10 empty offices marked too high because “my competitors are charging the same thing”. You’re doing irreparable damage to your entire revenue trajectory.
Your “premium price” has evaporated because the Vacancy Penalty keeps lowering the mathematically rational price while the room sits idle. This is why stubborn pricing quietly destroys coworking margins. In long-term leasing, a seven-year lease can forgive a few months of vacancy. The runway (lease-term) is huge. The back-loaded revenue catches up.
Coworking is the opposite.
Contracts are short
Members churn
Every month stands alone
Offices act more like hotel rooms than apartments
You can’t make up lost months. There is no runway. There’s just “occupied” or “empty”, and your revenue resets to zero every 30 days. That’s why the Vacancy Penalty is so brutal: one slow month can erase the entire premium you were chasing.
This is where ego sneaks in.
“My offices are nicer”
“Someone will eventually grab it at this price”
“I don’t want to look desperate”
“I’d rather it sit empty”
Being confident is not the same as being profitable. Overconfidence is expensive. Start thinking of empty spaces within your building as a monthly fee, because that’s what they are. Total them up and the amount may seem staggering.
That being said: The goal isn’t to race to the botton. This isn’t about discounting everything. This is about not letting stubbornness burn real revenue. You don’t drop prices out of desperation - you drop them because it’s mathematically smarter than losing $1,200 every month, and the permanent Vacancy TAX that you can’t shake once you incur it, waiting for the perfect member rate.
This concept gives you a tool for pricing. Ask yourself every month “Has the Vacancy Penalty lowered my actual breakeven price?”. If the answer is yes, staying stubborn is now costing you money.
But what is your breakeven price? Take your monthly building costs (rent, CAM, utilities, cleaning, insurance), divide by your total rentable square footage, and multiply by the size of the office. That gives you the true minimum you must charge to avoid losing money outright - usually far below your list price.
Your empty office is never appreciating in value. Every empty month lowers your optimal price.
