Flex Space Operator IWG Inks Major Deals

In another sign that the flex office space is well-positioned for the post-COVID world, IWG has inked a deal with Nippon Telegraph and Telephone to give the Japanese telecommunications group access to its offices around the world, according to The Financial Times.

This comes on the heels of an agreement to provide space to Standard Chartered employees with space on a 12-month trial, The Financial Times also reported.

It’s apparent that flex space will be incorporated into many companies’ office strategies once the health crisis passes. What is less sure who will be the main players in this post-pandemic environment. Many of these companies have struggled in the past year to meet the obligations of the long-term leases they signed when it appeared this office niche was poised for strong growth. Many analysts now expect revenue-sharing models to be more widely adopted going forward as a result. 

Companies are pursuing other paths as well. 

IWG, for example, is moving forward with a model in which it is converting some business into franchises, according to The Wall Street Journal, following its bankruptcy. 

Sensing an opportunity in this arena, CBRE is taking an aggressive approach. In February, it acquired a 35% stake in flexible workplace provider Industrious, making CBRE the company’s largest shareholder and significantly increasing the broker’s footprint in the flex workplace sector. 

CBRE and Industrious see the space as target-rich, with recent CBRE surveys showing that 86% of its occupier clients, including many of the world’s largest global corporations, plan to incorporate flex office space in their real estate strategies, and 82% will favor buildings that offer a flex-office component.

But not all flex providers are thriving. There is WeWork’s fall from its top perch in this sector. And over a month ago, Knotel and its US subsidiaries filed for bankruptcy relief under Chapter 11, with plans to be acquired by an affiliate of Newmark Group. It also plans to exit multiple locations in the US.

The pandemic had a significant impact on the company, according to CEO and co-founder Amol Sarva. “The pandemic created a uniquely challenging operating environment, with significant impacts on leasing velocity and the rate of renewals in key markets, particularly New York and San Francisco,” he said in prepared remarks.