United Kingdom

IWG counts on hybrid working options for "full power" recovery by mid 2022

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A handout picture shows office space by provider IWG in Spaces Globe Park, Marlow, Britain September 9, 2020. IWG Plc, 2021/Handout via REUTERS

  • Shares edge lower in early trade
  • Early signs of improvement continue - IWG
  • Market wants concrete delivery on flexible working deals- analyst

April 27 (Reuters) - Office space provider IWG (IWG.L) expects occupancy rates to regain pre-pandemic levels in mid-2022, with unparalleled demand for hybrid working models leading a gradual recovery after a "most challenging" first quarter of this year.

The recent spike in coronavirus cases globally has compounded worries for office property providers as governments in hardest-hit countries urge people to work from home and employers delay a return to offices.

"We are expecting to come back to healthy levels of occupancy and recovery in price as we go through the year and expect to get back probably by mid-2022 to full power," Chief Executive Mark Dixon said on an analysts' call.

IWG shares, which lost over a fifth of their value last year, were down 1.5% at 3.57 pounds by 0845 GMT.

The Switzerland-headquartered firm said it has witnessed "unprecedented demand" for its work products suitable for a combination of office and remote working that has become the norm during the COVID-19 pandemic.

The UK-listed owner of the Regus brand said open centre revenue in the quarter ending March 31 fell 16.1%, but that the quarter marked an "a clear inflection point" for its business with occupancy growth resuming in March after months of decline.

The company said Southeast Asia had come out of the crisis faster than other parts of the world, with activity in China ahead of pre-pandemic levels.

It added that the U.S. market, its largest, was also showing signs of improvement, with Texas and Florida seeing growth.

"These early signs of improvement continue to take root in many parts of the business," IWG said.

Although IWG has identified hybrid work models and flexible spaces as inevitable in future, the company has yet to detail the financial impact of adjustments to its real estate.

"Trends in both franchise agreements and enterprise accounts are encouraging, albeit the market will want to see a more concrete delivery of larger franchise agreements over the next couple of quarters," Davy Research analyst David Greenall said.

Greenall forecasts IWG's operating profit will break even in the current year and estimates a return above 2019 levels in 2022.

Reporting by Aby Jose Koilparambil in Bengaluru Editing by Tomasz Janowski

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