The World’s Largest Serviced Office Company Asks Landlords For A Rent Freeze
IWG has begun approaching UK landlords to ask for a rent freeze to help mitigate the impact of the novel coronavirus on its business, and has sought to sweeten the pill for those that offer new terms, Bisnow can reveal.
The London-listed firm has sent landlords a letter, seen by Bisnow, outlining changes that would help it absorb any potential loss of revenue while the public in the UK is told by the government to work from home where possible.
The letter asks landlords for a three-month rent freeze starting in April. In return, it offers to extend its lease by three months at the current rent, to make up for the income lost by landlords.
IWG declined to comment on the request. Bisnow has not confirmed if all of IWG’s UK landlords received the letter, or if landlords beyond the UK were approached with the offer.
The company is the world’s largest flexible office provider, with 3,338 locations in more than 100 countries covering 62M SF. It counts Regus and Spaces among the stable of different brands it operates.
The company’s full-year results for 2019 showed it making a record annual profit. Its pre-tax profit rose more than threefold to £489M while its operating profit rose 8% to £137M.
On a conference call 3 March with analysts after the results, IWG Chief Executive Mark Dixon said 28 of its centres in China were temporarily closed for cleaning, and that a total of 90 had been closed at some point. At that time, there had been no other closures elsewhere in the world.
“We've not seen any immediate impact on our performance, but there will be as the crisis continues to escalate,” he told analysts. “And it looks — we're pretty certain that it's going to escalate with the information that we have. And based on our experience in China, we can sort of calculate the effects even. But it's too early, really, to give any exact considerations. But clearly, it will impact the business this year. It's impacting, as I've said earlier, part of the revenues.”
He said the company could benefit from corporates choosing to take short-term flexible space rather than sign long-term leases, but this would be a short-term impact.
The company's share price has dropped 64% to 160p a share since the start of February, leaving it valued at £1.4B. That compares to a 35% drop in the value of the FTSE 250 index of which it is a part.
It has recently been seeking to reduce the number of offices it leases, looking instead to strike partnerships with landlords and build out its franchise business.
All eyes in the office industry have been on how the coworking and flexible office sector will deal with the impact of the coronavirus, with workers across the world working from home rather than coming in to offices. With shorter-term leases and licenses than traditional office companies, flexible office providers are inherently more vulnerable to the disruption in the world of work.