IWG: Construction Made Easy

International Workplace Group (IWG), the 3,300-location flexible workspace global powerhouse parent of Regus, a professional workplace brand; Spaces, a creative workplace brand; HQ, a hassle-free workplace brand; and Signature, a luxurious workspace brand, has announced plans to increase its Americas footprint. The concept plans to add 1,000 more locations under agreement over the next year, with the majority coming from business investors, building owners and institutional developers who want to fill empty spaces and generate revenue and operating income.

In a recent webinar, 1851 Franchise Publisher Nick Powills was joined by IWG of Americas CEO Wayne Berger, IWG Head of Center Delivery Te’Andre D. Sistrunk and IWG MD of Fit-Out Services Nick Bertram to discuss and showcase the design and construction process of the partnership growth strategy. Specifically, they talk about how building owners can launch seamlessly, IWG's sophisticated technology with new A.I. tools and the managed PM services offered when partnering with IWG.

“When we talk to prospective partners, we want to discuss the future of their asset, and the most relevant trend we are seeing within the commercial real estate industry is the desire to activate buildings into productive, beautiful and successful flexible coworking spaces,” said Berger. “We want to answer the burning questions prospective investors have and help support their efforts to maximize the capital investment they make by converting vacant space into a flexible coworking location.”

The Past Year

Following the COVID-19 pandemic, 90% of workers in North America are working in a more flexible way and 88% of companies are supporting those workers. As a result, IWG is hitting unprecedented levels of growth.

“We hit a record revenue year in 2022, exceeding $3.5 billion globally,” said Berger. “The demand has also increased over 40% since pre-pandemic. Why? Because companies and people are moving towards flexibility in terms of how, when and where they work.”

But within that trend, Berger says there is a big misnomer taking place. “Hybrid working is not working from home,” he said. “People are looking to eliminate their commute and determine where they work based on what is required of them that day. They want the responsibility to choose. That is why we are moving away from strictly working from home or from a central headquarters and more towards the ubiquitous adoption of flexible coworking spaces.”

This trend is bringing about the most structurally-focused shift in the history of commercial real estate, and IWG is growing alongside it. “Companies are taking the opportunity to rationalize their real estate portfolio, reduce space on lease and increase the number of flexible workspaces they offer to clients,” said Berger.

Last year, IWG saw 462 new partners sign on to open a flexible workspace with the company. Most notably, 91% of those locations were built through partnerships with building owners and business investors who were looking to fill vacant space in their commercial real estate portfolio.

“As opposed to signing a lease, they are making the capital investment to convert that asset into an IWG space,” said Berger. “In turn, we are managing the space and driving a premium on the return of that capital.”

Now, with experts predicting that 30% of all commercial office space will be flex by 2030, Berger says the opportunity is unprecedented, which is why IWG works so hard to support all partners looking to take advantage.

Education and Risk-Reward

With such a huge shift in the way commercial real estate works, Berger says IWG understands that there will likely be a period of education for the typical building owner or investor.

“The last 125 years have been the same — business investors buy a building, invest capital to make sure it has everything you need, then they sign the 10-year lease, securitize their loan and invest funds so tenants can build their space within it,” said Berger. “Now, buildings are being valued in a different way. The standard company has rolled out a policy that allows workers to work flexibly at least three days a week. The need for office space is completely different. Companies don’t need to sign long-term leases anymore. If you own a building and are an investor, you are now realizing that you need to adapt.”

So, when it comes to the risk-reward of this opportunity, IWG aims to help investors understand how they can activate their building and turn it into a destination that resolves the issue of increased vacant space within their portfolio.

“We can come in with a program that is different and provides an opportunity for them to drive immediate income on these vacant spaces,” said Berger. “It also allows them to grow revenue in a fluid way as they earn their costs back, earn their base rent back, earn their gross rent back and then earn a premium over that gross rent.”

What Prospects Should Know

As soon as a new prospect enters the IWG funnel, there is an entire team focused on helping them get onto the platform as quickly as possible. “We need to work together to make that happen,” said Bertram. “We want to explain how we can use their space the best we can, but our product can only be deployed once you understand the specifics of that building. The more we can help partners understand what needs to be done to turn their building into a center, the better.”

Bertram points out that one of the key aspects to keep in mind is the investment, not the costs, required. “Everything we do is about driving the best possible experience for the person who is actually going to be renting this space,” he said. “Our partition walls are designed to be 40db, for example, because we know how important acoustic properties are for the work experience. There is a cost involved with that, but it is an investment, because it is fundamental to driving a return. You really need to think these things through.”

Similarly, Sistrunk notes that prospects will need to understand the minimum effort required to gain the full benefit of IWG. “Whether it be how we design our coffee services or how we network through our copy machines, investors need to understand that these are all core criteria that are essential to our platform,” he said. “There are a lot of assets out there that people are looking to reactivate and understanding how that will work for their particular location is a big part of the process.”

The Simpler, the Better

While converting a space into a flexible coworking location can be complex, Berger says IWG aspires to make the process as simple as possible for the building owner. “All of the building owners we partner with understand managing a business and their assets, and a subset of them understand construction, but very few of them understand the secret sauce to building a great flexible workspace,” he said. “That is our expertise.”

For example, once a new partner signs on, one of the first steps in the process is working together with the IWG team to design a floorplan. “How can we create a wonderful customer experience and maximize your capital investment? We provide all the resources and guidelines they need to build an IWG location within their building,” said Berger. “Our teams have been building these locations for over 30 years.”

That is why IWG provides new owners with the New Center Starter Kit. “For a reasonable cost, we provide everything they need in order to activate the center,” said Berger.

The Importance of Support

What exactly does this support infrastructure look like? Berger says it comes down to a team of 11,000 employees globally, who are all focused on ensuring the customer experience is exceptional every single day.

“That team is there to support the building owners’ location every step of the way,” said Berger. “Building owners work with a Partnership Pro team who are there to help them specifically determine if it makes sense to convert their space to a flexible workspace and monetize it effectively. Once that makes sense and we sign an agreement, then the building owners are introduced to a whole host of individuals who are there to support them, both in-person and behind the scenes.”

To start, incoming partners will be immediately activated on the IWG platform, which is the largest digital commercial asset platform around the world. “There are millions and millions of eyes on that platform,” said Beger. “All of these people are looking for flexible workspaces. It drives great demand from day one.”

From there, partners will connect with the IWG sales organization, which includes over 4,000 employees worldwide.

“We just signed a location in NYC, for example, and we connected them with a local sales team in the area,” said Berger. “But, on top of that, every single person within our sales team has the opportunity to offer space within that new location. We support 82% of Fortune 500 companies, as well as millions of other companies. So, regardless of where the new location is, we have a global team recommending clients through our platform.”

IWG's support infrastructure also includes access to a large marketing organization dedicated to driving demand to every single location. The team drives organic search capabilities and local prospecting through social media, traditional marketing, and other initiatives.

“Overall, we understand this isn’t the building owners’ traditional role, so we want to make the process as easy, supportive and successful as possible,” said Beger. “They are surrounded by a global support team, as well as a dedicated local team. Project managers, new center project coordinators, partner ambassador teams, executive account managers, local organizations — everyone is dedicated to turning your space into a brilliant, profitable flexible workspace location.”

Design and Construction 

Perhaps one of the most essential areas of support comes during the design and construction process. Building owners who partner with IWG want to earn a premium on their available space, they don’t want to manage a construction project.

“Our team has over 200+ years of experience in design, construction and engineering,” said Sistrunk. “First of all, we help them understand the space and the timeline of how quickly we can get them to market. We look at all the potential hurdles, the floorplan, the capital investment. We want to do it right.”

But the design and construction resources available through IWG stretch well beyond the internal team, Sistruck says. “We have key partners who we work with day-in-and-day-out to bring the best of the best to the table for our building owners,” he said. “That could be the vendors we use for coffee or the contractors and engineers we use for construction.”

IWG also leverages a robust and innovative suite of tools to help with the construction and design process. For example, the company recently invested in an A.I. technology platform that can test thousands of different floor plan permutations to determine the optimal strategy for a certain location, all within just 48 hours.

“It is an unrivaled ecosystem that comes together to make each center as great as it can possibly be,” said Bertram. “The design and construction process may sound complex, but it doesn’t need to be daunting for the partner. We have points of contract to ensure partners can see the value that comes with all of our systems, tools and resources. It is not a forest they have to navigate on their own.”

The Future Is Bright

For prospective investors who think the IWG opportunity sounds too good to be true, Berger says that is intentional.

“When you walk into a hotel, it all works and guests don’t have to think about it,” said Berger. “That is similar to our business. Even our current building owners often walk through our space and are amazed at how we make it work. Anyone can design a great space, but not everyone can monetize it effectively to ensure there is a return on the capital investment. Most organizations don’t want to work with a bunch of different flexible workspace companies, they want one company that can give them the experience their team members expect regardless of where they are. Like Apple, Starbucks or Marriott — there is an expectation of experience. You want it to be easy. IWG provides that experience.”

With IWG, clients can search for space, book it out in advance and move in the very next day. “It is that convenient,” said Berger. “It takes six to 18 months to find a traditional lease space, negotiate the lease, start to build and ultimately move in. Now, our clients can move in within 24 hours. It is all about making it incredibly simple for clients.”

And a major part of that simplicity comes down to one thing: proximity. IWG is focusing on smaller markets because the number one amenity employees are looking for today comes down to the concept of the 15-Minute City. They want to live, work and play, all within a 5-to-15-minute commute.

“The single greatest thing that has come to living and working is the power of technology,” said Berger. “It has untethered people. They can now achieve the goals they need to achieve very simply by using a laptop and phone. I live in downtown Toronto and I used to have a 40-minute subway commute, which was considered convenient a few years ago. Now, I can walk seven minutes from my house to a great Spaces location. I will never go back because I’ve earned back an hour-and-a-half of my life, which I can spend being productive or with my family. It is so valuable and proximity is the core driver.”

Overall, Berger says the office is alive and well in today’s culture, but the way the office looks and operates has changed forever. “That is why we are adding IWG locations in every single neighborhood, city and town,” he said. “Proximity is the present. People want a better work life, and by partnering with building owners and institutional investors all over the world to open more IWG locations, that is what we are here to provide.”

Watch the full conversation here. 

Learn more at https://www.iwgplc.com/en-gb/develop-a-location.