Management Agreements: 20 Key Takeaways & Insights From Our 3-Part Series

Whether you’re a coworking space operator, a building owner, a landlord, or a developer, workspace management agreements are an important topic right now. The flex office boom is here, with predictions of massive growth as the newly-remote workforce floods into flexible spaces.

In our three-part management agreement series (read part one and part two), we provide coworking and flex operators considering management agreements, valuable inside information from Deskworks and Workplaces founder and CEO, Barbara Sprenger, and CapeSpace founder and president, Robbin Orbison.

These two veteran operators have a wealth of knowledge and insight to share when it comes to considering and creating a management agreement with an owner or landlord.

In this article, we’ll synthesize the key takeaways from the first two articles, and boil it down to 20 management agreement pro tips and insights for coworking operators, taken from the conversation between Sprenger and Orbison.

If you have questions about management agreements, creating a sustainable and profitable coworking space, or workspace management software, get in touch. The Deskworks team is ready to help. We’ve been running coworking spaces since 2009 and we’re eager to share our in-depth knowledge.

Now, here are the 20 Pro Tips: 

1. A management agreement reduces risk for both sides, if done properly.
2. With a pure management agreement, where the landlord is basically the owner of the business, the operator is paid a management fee, which can come in the form of a flat fee, a revenue share, or both.
3. As a flex space or coworking space operator, you’re being paid for management expertise and for your branding. You are the coworking expert. Make sure that is clearly understood and defined.
4. Management agreements are not for first-timers. As a workspace operator, you need to demonstrate experience and have a recognizable brand.
5. The downside of management agreements for operators is that you’re not building up a center that is saleable. As a workspace operator in a management agreement, what you have to sell is your brand, operations structure, and essentially your management contracts so make sure they are transferable.
6. There’s a benefit to partnering with a large property owner who may be able to move local and regional needles more easily than a workspace operator can.
7. One of the downsides of a management agreement is having less control over things like construction. It’s very different dealing with the construction team if you’re not the one writing the checks.
8. Set expectations from the very beginning on everything you can think of. You’ll miss some points, but you want to keep them to a minimum.
9. A clear division of responsibilities is essential. Make sure it’s clear in your contract who’s responsible for what, and build into that contract some kind of decision-making mechanism.
10. With a management agreement, you’re putting in more time discussing decisions, rather than just making a decision yourself. A well-structured and thought-out agreement reduces decision time.
11. If you want to reduce risk, but don’t want to come up with the capital, a management agreement can be a really nice way to grow your business.
12. Talk with other flex space or coworking space operators who have experience with management agreements. You’ll get answers to questions you didn’t think to ask.
13. Get a good lawyer.
14. Be sure your interests are aligned with your partner’s in how the agreement is structured. Make sure that it’s a partner you want to work with, and that you have good communication and clear alignment.
15. From a property owner’s perspective, find a management company that has some experience in flex space, not somebody who’s just started up.
16. Before making a commitment, look at what the operator has already done. Check out their existing spaces. Do you like them? Have they found a way to bring in a broad mix of people? Are the spaces well maintained? Do they have a track record of being profitable? They should be willing to provide you with a proforma operating statement.
17. Offer a variety of plans and membership options for the changing flex space world.
18. Don’t do management agreements because they’re the latest thing. Do them because they make sense for you and your brand.
19. Make sure your management agreement clearly states that the landlord has no right to continue to use your name, your website, your logo, your marketing materials, your software, your membership plan structures, and even your color schemes after the agreement terminates. All of that is part of your brand.
20. You’ll want to negotiate the best non-compete language you can. Ideally, the landlord should not have the right to include competing uses in their portfolio within a reasonable geographic distance. And they will probably want a non-compete radius as well to prevent you from cannibalizing their investment.

Management agreements, when done well, can activate a building, strengthen a brand, and drive revenue for both parties. If you’re considering management agreements, be sure you are as efficient as possible, since sharing risk means sharing profits. Your software should be extremely easy to use while automating your usage tracking and back-office processes, so you’re capturing all of the revenue you’re actually earning. If you have questions about setting up an agreement, schedule a free consultation with the Deskworks team.

Robbin Orbison

CEO of CapeSpace