The Problem Landlords with Empty Spaces Face and Why IWG is the Ultimate Solution

International Workplace Group (IWG) is a flexible workspace solution that has been operating for over three decades, with a footprint that includes more than 1,200 open locations within North America and over 100 added to development this year. IWG offers an investment model through a strategic partnership with landlords and building owners who adopt the IWG model rather than entering into or renewing traditional capital leases. Now, as the world shifts post-COVID to a hybrid working structure, more and more landlords are recognizing the value of partnering with a company like IWG. 

“We are seeing a dramatic acceleration of growth, largely because of the solution we can provide landlords,” said Wayne Berger, CEO of IWG, The Americas. “If you are a property owner or a management company with empty space in your portfolio, we have the ability to go in, activate that space into a high-demand flexible workspace and bring in revenue immediately.”

A Transformation in the Landlord Mindset

Landlords with commercial office space traditionally rely on long-term capital leases to maintain their businesses. These leases can run for 10 years or longer. But with remote and hybrid work on the rise and the culture of work rapidly evolving, many employers are downsizing or eliminating their brick-and-mortar office space altogether. To fill current or upcoming vacancies, many landlords are struggling to identify tenants willing to commit to long-term leases.

“The commercial real estate industry is going through a seismic shift as leases come to an end for companies across the country,” said Berger. “What we are seeing today is that the activity in commercial leasing is primarily centered around companies trying to determine whether they need to renew and how much space they need. Tenants are reducing their space as they shift to hybrid working and only bring employees to the office occasionally to collaborate and get together. The amount of space an organization needs is now dictated by what employees need to do on a day-to-day basis.”

Rather than simply working from home or from the office, more and more employees are expressing a desire for a third option — a hub-and-spoke model where they go to a flexible workspace every day in their local communities. With this evolution in work culture, the global flexible workspace industry is projected to nearly double in size, from $7.97 billion to $13.03 billion, by 2025. If property owners and landlords don’t pay attention to this emerging industry, Berger warns, they will get left behind.

“We are seeing vacancy rates increase in major markets across the world, and we are also seeing sublease vacancies accelerating as well,” said Berger. “There are also many organizations with properties on leases that are just sitting empty because employees haven’t come back following the pandemic. Many are choosing to reduce their traditional office space and instead allow employees to work across multiple locations through a hub-and-spoke model. Flexible working isn’t working from home — it is working closer to home, eliminating the commute. That is forcing organizations to look at their real estate portfolio differently. We are moving away from the 10 to 15-year lease, and building owners need to look and determine their plan for their space moving forward.” 

How IWG is Offering a Much-Needed Solution for Landlords

By partnering with IWG, commercial landlords and institutional investors have an opportunity to cater to these shorter-term tenants at higher profit margins. Once they partner with IWG, a landlord invests the capital necessary to convert a current space to an IWG branded space — professional workplace brand Regus, creative workplace brand Spaces, hassle-free workplace brand HQ or luxurious workspace brand Signature. Once this is complete, IWG operates the location, offering the landlord annual agreements. 

“We are a solution for the hundreds of building owners we work with across the globe,” said Berger. “Building an IWG flexible workspace drives operating income from day one to the landlord, which means there is no longer a wait for having to pursue that long-term lease. There is an opportunity for the building owner to not only provide tenancy, but it also becomes an incubator. As companies grow, they can expand their presence in the building, whether in our space or in the building as a future conventional tenant.”

As part of the IWG system, landlords and institutional investors can also feel confident that they are well positioned for the foreseeable future, Berger said.

“If you look at our business today, we are really unable to keep up with the demand coming in from everyone from Fortune 500 clients to smaller start-ups,” said Berger. “This gives us an exciting opportunity to work together with our landlord partners to satisfy that demand in both large and small markets.”

IWG is currently seeking landlord partners in key markets across North America as it aims to add 1,000 locations per year on its way to 10,000 total units. The brand is targeting landlords that own either a single building or a small portfolio of buildings, have an entrepreneurial spirit and perhaps most of all, share IWG’s belief that remote work is here to stay and understand that flexibility truly is the future.

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