Why hybrid working means more growth for franchise partners

Why hybrid working means more growth for franchise partners

Flexible workspaces will continue to thrive – and represent the ideal investment opportunity – post-pandemic.

While a full recovery from Covid-19 will take time for some businesses, what’s not in doubt is that the way companies use offices has been forever changed by the pandemic.

The end of Covid-19 won’t be the end of remote working, insists IWG’s founder and CEO Mark Dixon. “The pandemic has certainly had a dramatic and permanent effect, but it’s merely accelerated a trend that’s been under way for several years, as organisations progressively move to a ‘hybrid’ way of working: at home, a local office and occasionally at a corporate HQ.” Before the pandemic, it was forecast that 30% of office space would be flexible by 2030. Now, that landmark is likely to be reached much sooner.

For landlords and investors, it’s important to bear this sea change in mind as restrictions ease and returning to the workplace becomes an option.

The rise of hub-and-spoke

The sweeping changes to the way we work will be established not through the chaos of Covid-19, but on the foundation of significant advances in technology, according to Dixon. “Herding people to the office is looking increasingly obsolete, expensive and inconvenient,” he says. “In some cases, data saved in the cloud isn’t even in the same country as the staff accessing it. So why should workers go to the effort and expense of dragging themselves into work to spend the day working on a device that they have brought with them, and will return home with at the end of the day?” 

Forward-thinking firms had already embraced hybrid working before the pandemic, and IWG has long expected the hub-and-spoke model of working to go mainstream. Flexible workspaces in suburban areas will cater to rapidly growing demand as companies’ HQs become spaces for occasional collaboration (‘hubs’), and their staff pivot to doing day-to-day work from locations closer to home (‘spokes’). 

The benefits of hub-and-spoke are clear: if people commute less, they enjoy better work-life balance, while local communities are reinvigorated in line with the concept of the 15-Minute City. This ideal - originally posited by Professor Carlos Moreno of the Sorbonne - envisages improvements to towns and cities that are based around people’s basic needs. In a 15-Minute City everything a resident needs to work, live and take care of themselves is within a quarter of an hour’s commute by bike or on foot - and the philosophy is already popular with governments and policy-makers in locations including Paris, New York, Brighton and Ipswich. 

Flexible workspace and franchising

IWG has enjoyed a record start to 2021, with enterprise agreements a key part of its success. Fifty-four were signed in the first quarter of 2021 alone, including deals with Standard Chartered bank and Japan’s NTT. Together, these added half a million new users to IWG’s global network of coworking spaces. 

To meet demand for its centres from this new generation of hybrid workers, IWG is constantly working to expand its network of franchise partnerships. As Matt Kenley, IWG’s franchise development director for Asia Pacific, explained in a recent webinar: “In order to meet demand, we need to expand the reach of our network. [We are keen to] find the right partners that can grow with us, within a branded framework, and accelerate the network development to fulfil [hybrid workers’ needs].”

IWG’s franchise development programme is already building serious momentum. In 2020, it signed up 15 franchise partners, compared to nine the year before. These included the company’s first franchise agreements in the USA: in Detroit, Michigan, Dayton and Toledo, Ohio and Fort Wayne, Indiana. In Q1 of 2021, another seven were added, covering 32 locations. Research by IWG among 501 business leaders with an interest in franchising found that 56% were considering becoming a flexspace franchisee – the highest figure for any type of franchise opportunity.

Rapid growth 

Ricardo Lagdameo, Vice President of Damosa Land in the Philippines, spoke at the webinar and outlined plans to expand his partnership with IWG. Damosa Land recently became IWG’s franchise partner for the Philippines’ second largest island, Mindanao, after developing its first Regus centre in Davao City in 2016. That centre reached 90% capacity within a year, and Lagdameo said: “We brought new companies to the region: multinationals, SMEs and individual professionals. We shared a mindset with IWG, which was about how to bring more investment to the countryside outside Metro Manila.” 

The Davao Regus centre became the largest in the Philippines, and Damosa Land is now set on further expansion. “Our goal is to develop centres across the region – not just in Davao but in other key cities,” said Lagdameo. “In the next couple of years we are looking forward to building out seven more centres, maybe more.”

Meanwhile, in the UK there has also been a surge in demand for flexible workspaces outside the City of London, with franchisees stepping up to meet the demand. WG1 Offices recently inked a deal with IWG and plans to open five new flexspaces over the next four years in residential areas of the capital, including King’s Cross, Hoxton and Bethnal Green.

According to James Wright of WG1, there is pent-up demand for flexspaces in such locations. “People living [here] will probably go back to working in an office quicker than they might do if they were based further afield,” he says. But this is not because they want to return to commuting. Rather, Wright suggests, it’s about being tired of working from home in properties that are often too small to accommodate a comfortable office space.

IWG is positioning for fast growth in the years ahead – and franchise partners are going to be a key part of the story. As Dixon says: “The trends towards hybrid and hub-and-spoke working are irreversible and accelerating fast. Over the next three-to-five years, we will see more and more companies make the property choices that so many of our clients have made during the last few years and in 2020 in particular. The future of work is already with us.”

Looking for your next investment opportunity? Read some of our franchise partner testimonials or find out more about IWG’s franchising partnerships.