Services are evolving to meet that need. JL
Konrad Putzier reports in the Wall Street Journal:
Flexible-office operator IWG PLC. said last week that it is investing around $350 million into a venture with the Instant Group, which runs an online listing site for office space. The companies say the business will be the world’s largest online marketplace for flexible office space. As more companies send their employees back to the office, many are embracing hybrid-work schedules. That is increasing demand for offices and meeting rooms that can be booked by the day or by the hour. IWG and Instant Group are betting that this, in turn, creates the need for an online marketplace to easily find and book these spaces.
Entrepreneurs have long sought to create a big online listing site for office space similar to how Booking.com or Airbnb offer lodging options. Now the Covid-19 pandemic is breathing new life into these efforts.
Flexible-office operator IWG PLC. said last week that it is investing around $350 million into a venture with the Instant Group, which runs an online listing site for office space. The companies say the business will be the world’s largest online marketplace for flexible office space.
The move comes as demand for furnished office space under short-term leases is gradually recovering from its pandemic low.
As more companies send their employees back to the office, many are embracing hybrid-work schedules. That is increasing demand for offices and meeting rooms that can be booked by the day or by the hour. IWG and Instant Group are betting that this, in turn, creates the need for an online marketplace to easily find and book these spaces.
IWG Chief Executive Mark Dixon said he is making a move now to get ahead of potential competition. “I bet Marriott wish they’d set up Booking.com before Booking.com did, right?” he said.
IWG, based in Switzerland, operates more than 3,000 office spaces across the globe under brands like Regus and Spaces. Under the deal, IWG merged its digital offerings with the Instant Group, which aside from the marketplace also offers services like office management and consulting. IWG owns 85% of the combined company and Instant Group’s management holds the remaining 15%, Mr. Dixon said.
Flexible-office operators suffered during the early part of the pandemic, in part because their short-term leases, typically lasting a few months to a year, were easier for users to exit than traditional office leases that run to 10 years or more.
Many are still struggling with high vacancy rates at some urban locations, but demand is returning. WeWork said Friday that its open locations were profitable in the fourth quarter of 2021 for the first time since the pandemic started, though a third of its space still sat vacant. IWG said last week that revenues at its open locations rebounded in the second half of 2021 after a weak first half of the year and about a quarter of its space was vacant.
In a mid-2021 survey conducted by property brokerage JLL, 41% of office tenants said they expect to use more flexible office space as a result of the pandemic, up from 29% in a 2020 survey.
While a number of listing sites for office space exist, none has so far managed to emulate the success of Airbnb or Booking.com. Flexible spaces grew in the years before the pandemic, but they are still a small part of the office sector and the more common long-term leases still depend on brokers. That has limited how much business online marketplaces can do.
Mr. Dixon is hoping for a post-pandemic flexible-office boom to change that. “Many have tried, but here we start off with a very strong position at the right time in the market, we believe,” he said.
The two companies said they plan to take the venture public within the next two years. Much of IWG’s investment was used to buy out Instant’s backer, private-equity firm Bowmark Capital, the companies said.Instant Group CEO Tim Rodber was tapped to become CEO of the combined company. The online marketplace will include offices managed by companies like IWG and WeWork as well as hotel conference rooms and unused corporate office space, said Instant Group’s CEO for the Americas, Joe Brady. The new company will also offer other products and services including software to help companies manage remote work, he added.
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