How landlords and franchise partners can recover after the chaos of Covid-19

How landlords and franchise partners can recover after the chaos of Covid-19

Sponsored Content: IWG

As Covid-19 vaccination programmes around the world bolster markets, businesses are starting to get back on their feet. Alongside this bounce-back, though, the rise of hybrid working may be causing concern for commercial property owners and investors.

The hybrid model, which allows employees to split their time between home, the office and a third location such as a flexible workspace, is the preferred post-pandemic option for many workers, with research from the Office for National Statistics showing that 85% of adults who worked from home during lockdowns would prefer not to go back to the office full time.

Unsurprisingly, this is pushing businesses to reconsider the role of the corporate HQ - but those who own or are invested in office space shouldn’t rush to offload their assets. Adapting to the new normal is possible, and may even yield impressive returns provided it’s done well.

The new world of (hybrid) work

Far from forcing employees back into old-fashioned routines that require daily commutes, many firms are committing to the hybrid model permanently in the wake of the pandemic. “We’re never going to go back to working the way we used to work,” says Mark Read, CEO of advertising firm WPP. “People are working [remotely] three to four days a week, so we probably need 20% less space.”

Danny Harmer, Chief People Officer at insurance giant Aviva, says 95% of its 16,000 UK employees have expressed a wish to spend time outside the company HQ. According to a study from Forrester, they’re not alone: it predicts that 70% of companies in the USA and Europe will allow some sort of hybrid work, post-pandemic.

Firms as diverse as Facebook, Standard Chartered bank and Microsoft have stated their intent to allow a mix of in-office, at-home and near-home working – and in this new world, it’s inevitable that companies will look to reduce their real estate footprints.

JP Morgan Chase, BP and Barclays Bank are among a growing number of organisations that have stated their intention to shrink office space. Since the start of 2021, IWG has added two million new customers to its global network of flexible workspaces, as companies realise the benefits of providing employees with access to professional, well-equipped offices within an easy distance of home.

New opportunities

Amid fears for the commercial property market, astute landlords and investors are now taking aim at flexible workspace brands such as Spaces and Regus, both part of the IWG stable. These offer the short-term leases and agility that so many companies are now seeking, providing them with high quality office space that can be scaled up or down according to need.

Knight Frank’s 2020 Re-occupancy and Re-imagined Workplace survey shows that 47% of UK businesses (including large, established enterprises) plan to incorporate flexible office space into their real estate strategies. Landlords and franchise partners whose tenants or businesses have struggled in recent years are embracing the opportunity to offer workspaces on local high streets.

According to IWG research, flexspace is now a more attractive franchise investment option than traditional choices such as coffee shops or gyms. More than half of business leaders surveyed said they were either considering becoming a flexible workspace franchisee or would actively look into it within 18 months. In the first half of 2021 alone, IWG has seen a 350% increase in new locations signed up by franchise partners, compared with the same period last year. New partnerships will see more than 110 flexible workspace locations open around the world.

According to Knight Frank, this is a global trend, already well established in Hong Kong. “More mainland-backed developers, especially those without a large office portfolio in Hong Kong, will try to operate coworking space. It is a low-risk route for them to enter the leasing market,” says Martin Wong, Head of Research and Consultancy in Greater China.

Hong Kong’s Hysan Development has already entered a joint venture with IWG. The deal will see it operate 32 flexible workspace locations across the Greater Bay Area - a megalopolis that consists of nine cities, plus two of China’s special administrative regions.

In the USA, IWG currently operates more than 1,000 locations across 450 cities - but Wayne Berger, IWG CEO for The Americas, has ambitious plans to open thousands more. IWG is expanding more rapidly than ever in the USA, with demand for its flexible workspaces up by more than 40% this year. June 2021 was a record month for sales, which Berger says is no surprise. Hybrid working is here to stay, he explains: “the idea of travelling back and forth five days a week to one central office to sit in a cubicle is a thing of the past.”

Not the end for head office

For owners of large commercial premises, the shift to hybrid working may mean significant change, but it doesn’t have to mean shutting down. While hybrid working is “delivering spectacular benefits for employees and employers alike,” says IWG Founder and CEO Mark Dixon, “this is not to say that there’s no role for the prestigious head office.”

Rather than endless rows of desks, the corporate HQs of the future will consist of coworking areas, spaces for collaboration and points dedicated to helping colleagues connect. “This can be a priceless cultural asset for a business,” argues Dixon, “enabling people to imbibe the shared company spirit that sets them apart from other organisations.”

For landlords and investors, it seems the key to future-proofing their finances lies – as always – in understanding which way the wind is blowing. Adapting owned commercial spaces so they better fit firms’ requirements, or investing in flexible workspaces closer to residential areas, makes sense now.

“At IWG, we are aiming to expand our network, mostly by franchise, to provide a flexible workspace in every village, town and city,” says Dixon. “The pandemic has had a dramatic and permanent effect, but it’s merely accelerated a trend that’s been under way for several years – one that is irreversible.”

The days ahead are bright for property owners and investors, he insists, if they pivot and adapt: “The future of work is already with us. And it’s only going to improve.”

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