Franchise partner update: January 2021

Franchise partner update: January 2021

Every month, we round up the most exciting things to happen in the IWG flexspace franchise world. In January: a landmark signing in Denmark, a new opening in the Middle East, and growth in North America

Despite the chaos of last year, 2020 proved to be a strong one for IWG’s franchise programme, with plenty of activity from existing franchise partners, plus new partner signings to bring the IWG brand to an increasing number of territories and customers.

And this growth shows no sign of slowing in 2021, with several exciting deals and openings occurring since the start of the year.

1. Landmark Denmark signing

January 2021 saw the signing of IWG’s first franchise partnership in Denmark, with Tom Gunnar Høeg and Casper Rømer Rasmussen of Better Spaces Zealand. Three centres will be developed under the Spaces and Regus brands, with the first currently planned to open in June 2021. These centres will all open in smaller towns across Galleriet Hillerød in Denmark, including the cities of Hillerød, Hørsholm & Kokkedal.

Gunnar Høeg started his business life in retail, leading the largest supermarket chain in Denmark. Later he moved into investing in buildings and developing office buildings. Rømer Rasmussen began his career as an accountant at Deloitte, later becoming a real estate advisor.

The centre locations, including IWG’s first inside a European shopping centre, have all been carefully chosen to suit the evolving Danish business landscape: Hillerød is home to many pharmaceutical companies, including Novo and Biogen. It will also be the location for a new ‘super hospital’, which is currently under construction. Hørsholm is linked to engineering consultancy and information technology. Kokkedal has undertaken Denmark’s largest climate adaptation plan to date, called the Blue-Green Garden City.

IWG’s deal with Gunnar Høeg and Rømer Rasmussen begins with these three centres, with plans to extend to a larger cluster and open more centres. The shift into smaller suburban locations is part of IWG’s overall company strategy and vision.

Evidence from a CBRE Occupier Survey shows that Danish companies increasingly see flexible office space as a key element of their corporate portfolios and expect to make far greater use of this type of space over the next few years than they do currently. Indeed, it is the most popular type for future expansion.

2. Spaces comes to the Middle East

The first quarter of this year will also see the opening of the first Spaces centre in the Middle East – Spaces The Front in Riyadh, just a 15-minute drive from Riyadh Airport.

IWG’s Saudi Arabian franchise partner Faysal Altharwa of Tanami already has 14 Regus centres in the territory as well as one recently opened HQ centre (another of IWG’s operating brands). A pioneer in the Middle Eastern flexspace industry, he was IWG’s second ever franchise partner, signing his first deal with the company in 2015.

JLL anticipates flexspace will take up 30% of total office stock across the Middle East, US, Europe, and Africa by 2030. "While we believe there is some short-term pain as demand for flexible office space contracts, it seems certain to grow in the mid-to-long term as businesses adjust and adopt solutions that increase their agility and reduce their response times," said Dana Salbak, Head of Research for JLL Mena last year.

Looking specifically at Dubai, the largest office market in the region, Toby Hall, Head of Office and Business Space Leasing for JLL Mena, added: "To meet the growing demand, there has been a rapid increase in total supply of flexible office space in the emirate. Although the effort is gaining momentum, the level of flex space in Dubai remains below the EMEA average of 2.3%, suggesting there is room for further growth.”

Experts predict that the major driver of future growth is likely to be a shift in the type of companies using flexible space. While entrepreneurs, startups and SMEs were the traditional flexspace customers, large corporations are now seeking to house up to 30% of their staff in flexible office accommodation. Enterprise clients – those with more than 1,000 staff – will allow the market to grow faster.

3. Growth in North America

In the US, existing IWG partner John Schmidt, who currently operates in Puerto Rico and the Dominican Republic, has signed IWG’s first US franchising deal. It will see the opening of seven Regus locations in the Detroit metro area of Michigan, with the first centre planned to open at the end of the first quarter in 2021.

The private equity investor had his first experience of IWG when he used HQ Philadelphia Market Street as a customer in 1992. He became involved with IWG as a franchise partner in 2017. His involvement with the franchise mainly consists of overseeing expansion plans, models and projections.

“We’ve had such a positive experience working with Regus and building this partnership has been essential as we look to further develop our property investment portfolio,” says Schmidt, Chief Executive Officer of Megatron Inc./Megatron Equity Partners LLC./Megatron Workspaces Inc. “We are excited to chart the path forward as the first franchising deal in the US.”

In 2019, the flexspace market in the US became the largest in the world, outnumbering the UK (the initial market forerunner) for the first time. However, flexspace makes up less than 1% of total office space across the entire US market, meaning there’s ample room for growth.

“We are excited about our first deal in the US and see franchising as a vehicle for growth, as more turn to flexible working options,” says Wayne Berger, Chief Executive Officer, North America and Latin America, IWG. “We’re seeing that the demand for workspace flexibility is becoming increasingly urgent, driven by employees and employers – particularly in suburban markets.”

He adds” “Traditional franchises such as fast food restaurants, gyms, and hotels have reached saturation in many markets. Our franchise offering provides an opportunity for professionals to diversify their portfolio and invest in a market that is projected to grow significantly.”

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