Serviced office group IWG says companies are increasingly looking for office space in the suburbs and turning away from city centre locations, as the coronavirus pandemic continues to change working practices.
Despite a near-10% fall in third-quarter revenue to £583.3m and the ongoing closure of premises, the company sounded a bullish note for the flexible and co-working office markets in its latest trading update, saying that companies’ use of hybrid working “will gain momentum and requires flexible workspace solutions to deliver this successfully”.
Suburban offices are proving more popular than those in city centres, the company said, pointing to a 30% drop in deals in downtown New York versus a 40% rise in Southern Connecticut. “This is a trend we are monitoring in many of our markets,” the company added.
Sales of space in smaller offices, for one or two people, are up by a fifth compared to pre-Covid-19 levels, IWG said, adding: “Our research shows these trends are being driven by the growing demand for distributed working and working closer to home.”
The company has also seen a threefold increase in conversations with large corporate occupiers, striking recent deals with Nestlé China and EY.
IWG has been criticised for its dealings with landlords during the pandemic but said in the trading update that its “priority remains to work with landlords and to negotiate solutions that make centres significantly impacted by Covid-19 sustainable for both parties”. It added: “We have made good progress with these negotiations with many successful outcomes for both parties, but there is still much work to be done in the coming months.”
The company continued to close centres, with 66 premises closed during the third quarter.
Earlier this year IWG raised £320m to spend on M&A opportunities it said were likely to appear as a result of the coronavirus crisis. The company said it is now close to making its first such deal.
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