The traditional approach for a flexible workspace operator seeking to open a new location has been to sign a lease, cover the rent and fit-out costs, and then occupy the premises. While that’s still how many do business, this approach puts the bulk of the property’s financial risk on the operator.
The most significant shift for operators is in the financing of expansion. Rather than committing a large amount of capital to rent and fit-out from the outset, they can draw on the landlord’s investment in the property to grow their portfolio. In this way, an operator can open up more sites without unduly straining the balance sheet.
Management agreements are becoming a much bigger part of the flexible workspace market. Workthere’s 2025 Flexmark report found that 63% of European operators planning to expand are doing so through management agreements, compared with 45% in 2023. In the UK, the figure has risen from 46% to 78%.
That is a fairly significant change in only a couple of years.
Why Are Operators Choosing Management Agreements?
The basic attraction is capital.
Taking a lease can leave an operator responsible for rent, fit-out costs, and other expenses before the location has generated much revenue. If occupancy takes longer than expected, those fixed property costs remain.
A management agreement works differently. The landlord owns the property and typically funds more of the initial fit-out, while the operator takes responsibility for running the workspace. The commercial arrangement might include a management fee, a percentage of revenue, a profit share, or a combination of these.
When it comes to the balance sheet, this can ease the burden on operators looking to expand into new markets. CBRE points to management agreements and hybrid arrangements as further means for an operator to curtail capital outlay and not be so tied up in long-term lease obligations. Then again, there is a trade-off: the operator has to cede a measure of control and put more of the economics in the landlord’s hands.
Lease Vs Management Agreement: Where Does The Risk Go?
The simplest way to understand the lease vs management agreement question is to look at who carries the downside.
Under a lease arrangement, the operator is responsible for an agreed rent regardless of whether the workspace is 90% or only 50% full. It is a structure that allows the operator to gain more from a strong location, but one that also places more of any shortfall on them.
A management agreement is quite different in that it makes the landlord’s finances much more dependent on how the space is performing; if revenue declines, the landlord will be affected as well. In such a case, an operator has fewer fixed property costs to cover, but becomes more reliant on the site's performance and the terms agreed with the landlord.
This is one reason management agreements have become more attractive to property owners. Savills found that management agreements represented 41% of UK flexible-office operator transactions in 2024, compared with just 9% before COVID.
The difference is not simply the contract itself; it changes how financial risk and performance are shared between the landlord and operator.
The Contract Matters More Than The Headline Fee
This is where the difference between a management agreement and a lease becomes more important for operators.
One should not assume that an operator will be more profitable simply because capital requirements are lower. In the end, the economics depend on how much control is ceded, what the cost responsibilities are, and the terms of any revenue sharing or management fees.
The agreement needs to be explicit on these points: it must set out whether compensation is a fixed fee, a performance incentive, or some percentage of the top line. And there has to be a clear definition of revenue, including the treatment of bad debt and discounts.
Who Pays for the Fit-Out and Upgrades?
For operators, the shift changes the economics of expansion. They may be able to grow with less capital and lower fixed property exposure, but they also share more of the location’s economics with the landlord and face greater scrutiny over performance.
These details can have a bigger impact on the actual economics of a location than the headline management fee. For operators, having the landlord fund more of the fit-out can make expansion easier, but it may also mean less control over investment decisions and future upgrades.
Operations And Reporting Become Critical
There is also a practical issue that can easily be overlooked: both parties need to trust the numbers.
If the landlord receives a percentage of revenue, the operator needs reliable records covering memberships, desk occupancy, meeting-room bookings, invoices, payments, discounts, and cancellations. A monthly report pulled manually from several systems leaves too much room for errors and disputes. This is where workspace technology becomes part of the commercial model, rather than simply being an operational convenience.
A system that connects bookings, memberships, billing, and occupancy data can give operators and landlords a clearer view of how a location is performing. Operators can track KPIs such as occupancy, revenue per desk, lead conversion, member churn and meeting-room utilisation, while landlords can see whether the agreed business plan is actually being delivered.
Cushman & Wakefield has also pointed out that management agreements can be complex because there is still limited standardisation in how these deals are structured.
Does This Mean Leases Are Disappearing?
Not at all!
A strong operator with a proven location may still prefer a lease because it provides greater control over the income and the potential upside. Management agreements are not automatically more profitable either. They simply distribute the risk differently.
For flexible workspace operators, the real attraction of management agreements is the ability to expand while tying up less capital in property. For landlords, the appeal is having a specialist operator running the space while retaining a direct financial interest in its performance.
That is why flexible workspace management agreements are likely to remain an important part of expansion strategies. The numbers already show how quickly the model is gaining ground, particularly in mature markets.
Wrap Up
Operators may be able to grow with less capital and lower fixed property exposure, but they also share more of the location’s economics with the landlord and face greater scrutiny over performance.
As flexible workspace operators use more management agreements to expand, having the right systems in place becomes increasingly important. UltraSoftBIS solutions bring sales, proposals, contracts, bookings, billing, and analytics together in one modular platform, helping operators manage their workspace operations from one place.
