As the flexible office sector grows across Europe, Savills anticipates more European landlords will seek management agreements with operators to maximise their income returns.
Management agreements provide a number of benefits to landlords. Given the profit-share structure, a management agreement let in prime/ Grade A assets can enhance landlords’ overall income return. Increasingly, landlords of prime and Grade A buildings view flexible office space as an amenity within a building that can help accelerate leasing velocity and increase the rental tone for conventional space. Consequently, across the UK, the proportion of flex operator leases as management agreements exceeded 50% from 2021-2023 and reached 67% at the end of Q1 25, which was the highest proportion ever recorded.
However, in mainland Europe, landlords have signed traditional lease agreements for security of income. As the sector matures, and flex becomes more mainstream, we are seeing more examples of landlords entering management agreements, mirroring the UK trend. Between 2023 and 2024, the proportion of management agreements across Europe (excluding UK) rose from 17% to 23% of take up from flexible office providers, with landlords in Madrid, Amsterdam and Dublin most open to management agreements in recent years.
Management agreements often arise during periods of weaker economic growth, because operators can reduce their risk levels, even forsaking the higher return they could receive on a traditional lease. Given current geopolitical uncertainty, we are seeing an increase in occupier flex requirements, supporting flex contract occupancy rates.
Under management agreements, landlords also tend to have more control over how the space is used, and how the fitout contributions are spent. In a lease there is very little control around this aspect, so if an operator hands back the keys, the landlord might be left with a product unfit for purpose. Whereas if they have control over what is delivered and own the product that is ultimately delivered, even if an operator exits, it is more straightforward to find a new partner.
A flex offering in a well located area can also allow a landlord to charge a rental premium to tenants on conventional leases in the building as occupiers increasingly seek flexibility for expansion/ project-based work.
For smaller occupier requirements (<500 sq m), European landlords are now providing managed Cat A+ space with private facilities, up to a five year lease term, popular with businesses seeking a flexible, long-term, self-contained workspace without operational hassle to improve lettability.
As such, Savills European investor sentiment survey 2025 indicates that 10% of landlords are seeking to increase their exposure to flexible offices through management agreements, and 13% through managed space over the next 12 months. We believe there lies an untapped opportunity for European landlords to maximise income returns by partnering with operators on management agreements.
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