Well, we didn’t see this one coming, especially as it was less than a month ago that International Workplace Group (Regus) reported a 4% profit dip in pre-tax profits in the first half of the year.
PropertyWeek reported earlier today that Regus bought none other than Basepoint Business Centres, one if its largest UK serviced workspace rivals.
IGW’s recent profit dip was blamed on the company’s increased spending to expand its network, and it appears that they intend to keep on ‘shopping’. Regus’ recent acquisition of Basepoint cost them a staggering £100m; but it’s also given them an additional 1 million square feet in serviced office space, which will amount to access to over 340 centers in the UK alone.
Amid WeWork’s mind-blowing growth, Regus is getting more and more aggressive with its growth strategy as well, not shying away from large investments as long as they provide significant growth in the short and medium term. In fact, IGW is hoping the Basepoint deal will “bolster its balance sheet as all the Basepoint centres are freehold and fits with its (IGW’s) long-term strategy to increase the proportion of freehold assets in its portfolio relative to leasehold.” We think this is a much needed element to add significant value to Regus and it’s long overdue in our view.
Industry consolidation is something industry leaders and experts have been expecting and predicting for over a year now, especially from large players like Regus. Indeed, Regus was among the first operators to step up to the plate, acquiring Avanta, Causeway House, BusinessSuites, Spaces, and others.
The question is, how far will Regus go to remain a dominant player in the flexible workspace market? Profit dips and WeWork’s exponential growth haven’t stopped the company one bit. Yet, the competition is only bound to get stronger as property groups and real estate companies enter the industry, which will make competition more aggressive and it will make it harder for operators to cut good deals with landlords.
Even so, we’re not too worried about the serviced office giant, as they’ve proved time and again through their long-standing industry presence (even when many have been blind to their value) that they know what they’re doing.