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The Rise of the Non-Dedicated Subscription-Based Revenue Model

Non-Dedicated Subscription-Based Revenue Model

Non-Dedicated Subscription-Based Revenue ModelAs the U.S. economy slowly pulls out of one of the worst recessions in history, we are beginning to gather information from our partner centers about the collateral damage and what the recovery looks like to them.

What has changed since 2008?  Is your mix of product line and service revenue the same now as it was before the downturn?  What helped you survive during the last five years, and what do you think will ensure you thrive in the next five?

These are all questions the CloudVO ™ Team has been asking small and large centers alike – and their answers may surprise you.  Thanks to our partner center interviews, and the annual Global Workspace Association (GWA) Financial Survey, we can draw some very clear conclusions.

    • Revenue growth of the dedicated office as the economy continues to “recover” is weak at best, and stagnant in many cases
  • Subscription-based revenue, such as Virtual Offices and Coworking memberships, is providing growth rates 3-4 times that of dedicated office rents.

The common perception is that the way we work has changed – mobility, collaboration, flexibility, and community are on the rise – but does the data support that notion?

We think it does.

Subscription-based revenue models, with 4 times the growth of dedicated offices, represent the money behind the trends. Individuals who are mobile use a Virtual Office to work from various places throughout their day, and companies who thrive on collaborating with like-minded entrepreneurs join a coworking place.

Non-dedicated subscription-based revenue used to be heralded as the “recession proof” piece of the pie, or the ”insurance policy” to help smooth the ups and downs of economic downturns – and it was the dedicated office rentals that spurred growth and caught the eye of potential industry investors.  But as we’ve seen, recent data suggests differently (see How does Your VO Revenue Growth Compare To The Industry?)

Filling the full time offices, sometimes at ridiculously low rates, is what kept the doors open and is still the base revenue of most centers, but non-dedicated subscription-based revenue such as Virtual Offices and Coworking Memberships is what has, and will, provide future growth!

The result is that investors are no longer viewing the Workspace-as-a-Service industry as a one-trick pony, but as an essential service provider who’s revenue is no longer tied to the square footage listed on a master lease. 

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