The flexible office sector has seen management agreements increase by more than 30%, according to a report by Workthere.
Research from the company, owned by Savills, has found that management agreements in the flexible office sector accounted for 41% of deals in 2022, compared with just 9% pre-Covid in 2019.
It found the agreements accounted for 52% of all sq ft taken by flexible office operators in 2022 – a figure that it expects will increase further by the end of the year, even as flex provider WeWork posts a $629m loss and plans office closures.
Management agreements have seen an uptake in deals compared with traditional leases. Workthere found the number of deals agreed on conventional lease terms has reduced from 81% in 2019 to 56%.
Jack Williamson, head of Workthere, said: “[The agreements] often gain more traction in more challenging markets, typically due to them being more cost effective and more risk averse for operators.”
He added that this bounce back in take-up “could signify a fundamental shift in the acceptance of this type of structure from landlords who have historically been less in favour of them due to the perceived risk associated with not having a formal lease”.
One of the key reasons more landlords are opting for management agreements, according to Williamson, is around control. He said: “In the right sort of partnership with an operator, a landlord has a lot of control as to how the space is delivered, as well as transparency around performance. Many landlords are combining the flexible workspace element with a wider amenity, which is creating an attractive offer as part of a larger multi-let building for prospective tenants.”
He added: “Looking ahead, the wider economic pressures will inevitably have an impact on the flexible office market, and as a result we are likely to see some consolidation and rationalisation.”
However, he expects take-up levels to continue to rise in the short term, albeit “not to the levels seen in 2017 to 2019”.
To send feedback, e-mail chante.bohitige@eg.co.uk or tweet @bohitige
