NEW YORK, Oct 1 (Reuters) - WeWork’s decision to abandon its initial public offering and the resulting turmoil at the shared office space provider has created an opportunity for major competitor IWG, said IWG’s founder and Chief Executive Mark Dixon.
He said that potential tenants looking for office space and landlords looking for partners are heading for IWG because it has a sound and sustainable business that is profitable. This contrasts with the large losses reported by WeWork in its filings for the IPO, which also triggered questions about whether its business model worked.
Dixon said in an interview with Reuters on Tuesday that there was clearly going to be “a flight to quality” that would benefit London-listed IWG.
As a publicly-traded company, IWG has a “high level of disclosure” that was going to appeal to customers looking for a reliable partner in the current climate, he said.
But Dixon, a pioneer in the serviced-office business beginning 30 years ago in his native Britain, said he wants to see WeWork survive as a collapse would be bad for everyone.
“The world would be a different place,” Dixon said. “There won’t be any winners.”
And he credited WeWork with teaching investors, companies and the public a lot about the flexible workspace industry.
“They’ve changed our industry in a very good way,” Dixon said. “Overall, the industry is a beneficiary from what they’ve done.”
Dixon knows firsthand the difficulties of running a troubled business. Regus, a predecessor to IWG and still one of its brand-name offerings, filed for U.S. bankruptcy protection in 2003 after the dot-com bubble burst and the U.S. economy entered recession. It proved a valuable lesson, he said.
“Every year we’re planning it could be a recession,” he said.
To reduce risk, IWG signs shorter-term leases and recently began franchising, which at the end of June accounted for about 10 percent of its locations. Eventually it is targeting 90 percent, he said.
By contrast, WeWork’s U.S. leases are 15 years on average, increasing its risks if revenue takes a hit in the short-term.
New accounting rules that make companies report their long-term leasing liabilities for the first time in financial statements are driving corporate interest in flexible workspace, Dixon said.
“More and more companies are looking to change the way they use real estate, more and more workers want to work closer to home. So, we’re seeing very strong growth in demand,” he said.
Reporting by Herbert Lash, additional reporting by Aleksandra Michalska Edited by Martin Howell and Nick Zieminski