Tag: IWG

Coworkings: the New King of the Real Estate Sector

15 February 2019 – Eje Prime

Millennials, flexibility, start ups…All of the socio-demographic trends are inevitably leading to one common place: coworking offices. Flexible workspaces have become the great promise of the real estate sector but their largest operator, IWG, generates just 15% of its revenues from them and WeWork is multiplying its losses year after year. What risks does the model have? Can it withstand a recession without the guarantee of the traditional five years of mandatory occupancy? And what if Amazon and Facebook, its tenants of today, end up becoming its main competition?

In 2017 alone, the total volume of flexible workspace in the twenty largest markets around the world grew by 30%, equivalent to 1 million m2. Since 2014, the sector has doubled, and in cities such as London, they account for 20% of the office space leased, according to a report from JLL. In Barcelona, that figure already amounts to 12%.

The consultancy firm forecasts that the European stock will grow by between 25% and 30% per annum on average over the next five years and will account for 30% of some corporate real estate portfolios by 2030. But those predictions hide the major challenges that are threatening the great promise of the sector.

One of the main challenges facing the model is that the operator is tied to a given property for at least five years, like in the case of a traditional office, but its tenants have contracts that last for months or even hours. When the next crisis hits, what guarantees does the owner have that the operator will be able to continue paying the rent?

“On paper, that does seem like a risk, but the reality is that the coworking phenomenon was launched during the crisis”, explain sources at Savills Aguirre Newman. All sectors suffer when there is a recession, but traditional offices are hit harder because whoever cannot bear those costs can afford a coworking space”, argue the sources at the consultancy firm.

Another of the risk factors is that coworking offices have capitalised on the lack of available office space in the centre of cities and also, on the shortage of appropriate spaces for the new ways of working within traditional companies (…).

“The players driving the sector are multi-nationals that are looking for appropriate spaces for their innovation teams or for project-based work”, says Manel de Bes, Director of the Office department at Forcadell.

But, what will happen when the offices of these large companies have adapted to the new scenario? “At the moment, most companies are in the experimental phase; if they consider that the trials do not meet their needs, they will be able to return to more conventional models”, explains JLL’s report (…).

From rock star to conservative player

Within the coworking phenomenon, the rock star is WeWork. The New York-based company, which became the largest lessee of offices in its home city last year, is worth USD 20 billion, but it recorded losses of USD 723 million in the first half of last year.

“Its model is based on taking over the best buildings, in the most prime areas and then competing with other operators on price: it is not sustainable”, argues a competitor in the sector. “Sooner or later, they will have to raise their prices”, he assures.

IWG’s model is more conservative. That firm has an umbrella of five brands and thirty years of history. “We have gone through three or four cycles and we cover our backs: first, by diversifying in terms of the type of tenant to minimise risk. We also ask the owners to invest and we do not select the best buildings or at any price”, said Philippe Jiménez, head of the group in the Spanish market (…).

De Bes from Forcadell forecasts that “Over the medium term, just four or five operators will remain: those that lease 200 m2 or 400 m2 in secondary areas will exit the market”. In fact, the market is already becoming more concentrated: since 2015, the five most important operators have accounted for 50% of all of the new flexible workspace in Europe (…).

Original story: Eje Prime (by Iria P. Gestal)

Translation: Carmel Drake

Regus on the Hunt for Partners to Open 550 Centres Across Spain

8 October 2018 – Eje Prime

Regus wants to expand to the last corner in Spain. The supplier of flexible workspaces has set itself the objective of opening 550 centres in the domestic market and, in order to develop that plan, the company has launched a franchise model through which “we want to be everywhere”, said the Director-General of Regus in Spain, Philippe Jiménez, speaking to Eje Prime.

The franchisees of Regus, as well as their clients “will enjoy the same services as the company’s own centres”, said Jiménez. Currently, there is an “exceptional demand” for flexible workspaces in Spain and the company wants to provide a service that “would be impossible” without this new model, recognises the executive.

“We want to grow quickly and for that, the franchise model is necessary”, explains the Director. In exchange, the company offers its partners the same operating and marketing support that is provided to Regus’s own centres.

Jiménez says that “there will not be any limitations in terms of location”. “We like metropolitan areas in large cities, but also in secondary and tertiary cities too”, he continued. The only conditions that Regus is going to impose are that the franchisee must assume the full investment of the centre and that “the quality of our centres must be maintained”.

“For us, Barcelona and Madrid are the same as any other smaller city”, highlights the executive, who believes that with this expansion, through franchises, the company will provide clients with an increasingly “more efficient and more technological” service.

The new expansion formula that Regus is launching in Spain is a “mandate” that comes from the firm’s parent company, the giant IWG, but one that Jiménez supports. “Having centres all over the place allows you to be more productive”, explains the executive.

A former director of Día will lead the franchise area 

Regus’s new plan in Spain will also have a new director. Luis Herranz will be responsible for managing the expansion of the franchises. Recruited a month ago, the director comes from Día, where he has been working for the last four years. Since 2016, the executive has been the Director of Franchises and Master-franchises at the supermarket chain.

“We are adopting the franchise formula as a key lever in our growth strategy to expand Regus”, says Herranz on the social network Linkedin. It is a “business model that is simple to manage and that generates good returns”, says the director.

In terms of returns, Jiménez says that the flexible office model offers “large cash yields and significant double-digit investment returns”. “The sector of offices as a service is one of the fastest-growing markets in the world, and has become the new target for investors and franchise operators”, highlights the Director General of Regus in Spain.

New openings and targets: Murcia, Toledo, Sant Cugat and Gijón

Whilst it searches for its first franchisees, Regus is continuing with its growth plan in Spain. Already present in Madrid, Barcelona, Valencia, Sevilla, Málaga, Bilbao, Palma and Zaragoza, in November, Regus is going to add Murcia and Toledo to its footprint in Spain.

Over the last year, the company has opened 10,600 m2 of new office space. The most recent centres to be inaugurated have been those in Alcobendas and on c/Ortega y Gasset in Madrid; Diagonal Hightech and Sarriá Fórum, in Barcelona; and the Torre Aragonia centre in Zaragoza (…).

The main brand of the giant IWG, which also operates the co-working firm Spaces in Spain, Regus has a presence in 120 countries and more than 1,100 cities with 3,500 centres. The company provides services to more than 2.5 million clients around the world.

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake