Written by Mike Kriel, CEO of Launch Workplaces
Launch just went through a new management agreement for a new opportunity, and the deal validated something I’ve been seeing more and more. When building owners sit down to negotiate right now, their first priority is flexibility.
Here’s what that looked like in practice, and what it should tell you about how to approach your own management agreement conversation.
The Owner Told Me Up Front That Flexibility Was His Top Priority
I had a good conversation with this building owner early in the process. He told me straight out what mattered most to him on the management agreement side: flexibility.
He didn’t lead with price, projected return, or the capital he’d need to stand the floor up. He led with flexibility.
That’s a shift worth paying attention to.
For This Owner, Flexibility Meant Having a Clean Path Out
When we unpacked what flexibility meant to him, it came back to the same thing: how do I get out of this if I need to?
He wasn’t trying to kill the deal before it started. He wanted a clear, structured way to end it if circumstances changed. If the building got sold, if his strategy shifted, if the floor needed to go back to a traditional tenant, he wanted the paperwork to let him move without a fight.
At the management agreement level, flexibility is the exit.
I’ve written before about why the exit is the first thing you should negotiate in a management agreement, and this deal was a live example of why that matters.
The Structure We Landed On: Five-Year Term, Automatic Renewals, and a Termination Clause with a Diminishing Fee
Once we knew flexibility was the priority, the rest of the deal structure built itself around that.
Here’s what we landed on:
- A five-year initial term
- Automatic renewals after the initial term
- The ability for the owner to terminate with cause or without cause after a certain amount of time
- A termination fee that diminishes over time
That’s a very different structure than a straight ten-year management agreement with no off-ramp. He gets protection against being locked into something that stops working for him. We get enough runway to build the business, generate returns, and prove the floor out.
We restructured the agreement language to meet all of his requirements. It took one draft, and he signed off on every term.
That’s what happens when you build the deal around what the owner tells you matters most, and it’s another reminder that management agreements don’t have to be ten-year deals to work for both sides.
Flexibility Ranked Above Return and Cost of Capital for This Owner
This part is worth sitting with.
This owner’s top priority wasn’t the per-square-foot return, the capital outlay to stand the space up, or operator track record, although he did his diligence on all of that too.
What mattered most to him was knowing he wasn’t signing himself into a corner. Once we structured the agreement around that priority, the rest fell into place.
I’ve been doing this long enough to know that when an owner tells you what their top concern is early, the smart move is to build the whole conversation around solving for that first. It’s also the single best way to address the financial risk hesitation I hear from so many owners when they’re first evaluating flex.
Tell Your Operator What Matters Most Before You Negotiate Anything Else
The takeaway for building owners is simple.
Before you start negotiating a management agreement, decide what matters most to you and say so clearly on the first call. Pick one or two things that have to be true for you to feel good about this deal, and lead with those. A wish list of twelve items or a prioritized spreadsheet doesn’t do the same work.
Then let the operator respond to that directly.
For this owner, it was flexibility. The next owner I talk to might be more focused on return, or on timeline, or on how the operator’s P&L reporting looks on a monthly basis. Whatever the priority is, name it clearly before you start negotiating around it.
The operators worth working with will restructure the agreement to meet it, and the deal will close in one draft. The ones who try to steer the conversation back toward their standard template are telling you something about how they’d treat you as a partner. Here’s what to look for when a coworking operator first reaches out and how to pressure-test whether they’re the right fit.
For a full walkthrough of how to approach management agreement conversations, start with The Commercial Landlord’s Guide to Flexible Office Space.
And if you aren’t already watching, Flex in Five on YouTube is where I break down one landlord question at a time.
