For some years now, landlords have been introducing flexible space in a variety of ways — often, by leasing space to a flexible office operator. This satiated growing demand for flexible space and, in some cases, allowed the landlord to provide other workspace solutions to tenants that outgrew their coworking space.
However, COVID-19 has impacted the coworking sector heavily and many operators are facing difficult decisions.
With landlords eager to retain a flexible workspace element in their portfolio, some are now looking at management agreements as an alternative route that works in favor of both parties.
By partnering with experienced flexible space operators rather than simply leasing out space, landlords are able to receive a greater share of the revenue and have more control over the flexible offering, while the day-to-day running is left to the coworking company. For the coworking operator, a management agreement helps protect them from economic shocks and ensure smoother revenue generation. Also, the landlord typically takes on the cost of fitting out the space.
One example is London-based Knotel, which has management agreements in place for around one quarter of its portfolio.
“Larger flex operators with a growing portfolio are the ones entertaining these types of agreements,” says Tashi Dorjee, flexible space solutions lead – Australia and New Zealand, JLL. “They have the resources to propose a financially attractive business model, guide the design and build process, the capacity to train and manage on-site staff, and fill the space to generate revenue.”
“The simplicity of flex leases help save tenants money, while the hospitality aspect helps attract talent,” Dorjee says. “For property owners, they see the opportunity to tailor flexible space to their building, as well as shape the experience for the tenant they want to attract.”