IWG, the world’s biggest provider of serviced office space, reported record revenue last year after cashing in on the popularity of hybrid working.
Mark Dixon, the property industry veteran and IWG’s founder and chief executive, believes that head offices are becoming “either dead or much smaller” now that working from home has become more popular.
“[Hybrid working] is one of those things where everyone is a winner, unless you’re a real estate investor with offices in downtown areas,” Dixon, 63, said. “It’s a much greener outcome, lower costs for companies and much better for people.”
He said those office owners have turned to IWG, formerly known as Regus, to help ready their buildings for flexible working. IWG has seen “rapid growth” in demand for what it calls capital-light contracts, where landlords hand over their buildings and ask IWG to run them as serviced offices.
“If you’re a landlord, you’re looking at a totally new landscape, where the tenants you used to have aren’t there any more, so you’re looking for new ideas,” Dixon explained. “They realise that [businesses] are moving to hybrid working, so they call us and ask us to put their property on the platform and we fill it up for them and create revenue.”
Last year, IWG signed 462 such contracts and it is on track to sign more this year. Hybrid working has also helped IWG to sign up more occupiers, some of which have begun to ditch their long-term leases of entire floors and buildings and replace them with shorter, more flexible deals instead. Occupancy within IWG’s offices has risen to 73.5 per cent from 68.2 per cent a year ago.
Because of that, in addition to some price increases to cover rising costs, IWG generated record revenues of £3.1 billion in 2022, a 24 per cent increase on the £2.5 billion it turned over in 2021.
The group, which has about 3,400 centres in 120 countries, was founded by Dixon in 1989 when he opened his first office in Brussels. He remains the company’s biggest shareholder, with a 28.6 per cent stake worth about £550 million.
IWG swung to an operating profit of £147 million, versus an operating loss of £87 million in the previous year. However, on a statutory basis, the company fell to a pre-tax loss of £105 million, down from £259 million in 2021.
That partly reflected increased finance costs as interest rates spiralled higher, as well as extra investment into Worka, a new workspace booking app that IWG is building out after having merged its digital assets with the Instant Group this time last year. There was some talk last autumn that private equity firms were eyeing up Worka. IWG confirmed that it was “continuing plans to evaluate reducing its ownership stake”.
Looking ahead, Dixon said that “momentum continues going into 2023”, with revenue, operating profits, occupancy and pricing all picking up towards the end of last year.
IWG shares rose 3¾p, or 2 per cent, to 192p yesterday, valuing the business at close to £2 billion.