This article is from the Australian Property Journal archive
HYBRID work solutions provider IWG has added 867 new locations to its network over the course of 2023, almost doubling the number of new locations compared to the previous year, as the white-collar workforce settles into flexible post-pandemic habits.
An overwhelming 95% of these locations are being delivered via managed partnership agreements, as part of on IWG’s capital light strategy.
IWG’s brands include Regus, Spaces, HQ and Signature.
Towards the end of 2023, IWG reported its highest ever revenue in its over 30-year history, with group revenue increasing in the September quarter by 8% to £830 million ($1.6 billion AUD).
“The rapid growth in new locations is being driven by property owners and partners seeking to capitalise on the rapidly growing demand for hybrid working. Many of these property owners have vacant space to fill with the decline in demand for traditional office real estate,” IWG said.
IWG now has 4,000 locations in more than 120 countries – it added 462 in 2022 – and believes there is potential for further growth from the estimated 1.2 billion white collar workers around the world and a total addressable market of more than US$2 trillion ($2.38 trillion AUD).
IWG said growing demand amongst property owners and investors to open a new IWG location or convert an existing one is being driven by two “distinct yet complementary real estate trends”.
“First, companies are reappraising their property portfolios and downsizing in city centres, replacing long, restrictive, and expensive leases with flexible space with operators like IWG.
“Second, they are taking on flexible workspace in local neighbourhoods, closer to where their people live and want to be, as part of the increasingly popular ‘hub-and-spoke’ office model, where employees divide their time between home, local offices, and city headquarters.
The majority of IWG’s new locations are in the suburbs, smaller commuter towns and cities. These include regional areas with smaller populations such as Mawson Lakes in South Australia and Nedlands in Western Australia, where IWG opened new Spaces centres last year.
A recent study by IWG and Arup found that the number of office workers in commuter towns could increase by up to 175% in the UK and 60% in the United States, as businesses shift permanently to hybrid working. According to IWG’s recent Australian Hybrid Workers Survey, more than half (56%) of workers agree that they are likely to resign from their job in 2024 if they need to commute long distances daily, while 70% of workers said that hybrid working has helped them to navigate cost of living pressures. Notably, 77% of Australian hybrid workers also see a strong correlation between their wellbeing and their ability to work flexibly.
Major office landlord, Dexus, this week announced a joint venture with The Work Project, owned by Singapore-listed CapitaLand, to create a new flexible workspace business that will look to capitalise on the growing post-pandemic market.
WeWork restructure stalls
Meanwhile, efforts to restructure WeWork may have stalled, and lawyers for landlords and creditors told a bankruptcy court the company is either unwilling or unable to pay rent on at least some of its office space.
They said the company’s post-bankruptcy plan is heavily reliant on securing a significant reduction in future rent costs from landlords, and that the company had failed to update its business plan and left details out of a key reorganization proposal.
A WeWork attorney told US bankruptcy judge John Sherwood the company is considering taking out a new bankruptcy loan, Reuters reported.
WeWork was the poster child for the nascent flexible and co-working space industry, once valued at US$47 billion. The New York-based company attempted an aggressive global rollout that ultimately saw it haemorrhage money, while then-CEO Adam Newmann’s erratic behaviour and spending started raising concerns, and a public float failed.
It was bailed out by Japanese investment group SoftBank, which has sunk tens of billions of dollars in the company, but has been unable to capitalise on sector momentum since the pandemic, and its share price has been all but wiped out completely.
WeWork filed for bankruptcy in November. It had 777 locations in 39 countries, according to the company, at the end of June.
