WeWork Acquisition Drives Global Expansion as Regus Profits Dip

It’s been another rollercoaster week in the flexible workspace industry, and it’s the usual suspects: WeWork, IWG (Regus) and Chinese firm UrWork.

In brief this week:

•       WeWork shoulders up to IWG’s Spaces by investing in Southeast Asia and South Korea
•       IWG (Regus) profits take a tumble after increased spending to expand its network
•       UrWork announces funding of $178million to fuel further expansion

Over the past few days, news has emerged that WeWork is set to invest $500 million in Southeast Asia and South Korea as part of its global expansion strategy — a move which includes the acquisition of Spacemob, a Singapore-based coworking brand founded in 2016.

Another brand that’s familiar with growth by acquisition is Regus (IWG plc), which now operates close to 3,000 business centres worldwide.

However, IWG yesterday revealed a dip in pre-tax profits of 4 per cent in the first half of the year.

Like many other serviced office and flexible space operators, IWG’s Regus is facing increasing competition not just from WeWork, but from many new market entrants keen to invest in the growing appetite for flexible workspace.

With that in mind, it’s unsurprising that Regus is seeking to strengthen its grip on the market with further growth and, characteristically, more acquisitions. Indeed, IWG’s dip in profits is reportedly due to increased spending to expand its network against a backdrop of “improving sales trends”.

Mark Dixon, Chief Executive of IWG, said:

“We have made the decision to invest in our network to deliver additional earnings growth and shareholder value creation over the medium-term. In this regard, we decided to opportunistically acquire properties as well as further accelerate our growth.

“The underlying capital efficiency of our business more broadly has improved as IWG is increasingly working with partners in expanding its business. This is also reflected in our pipeline.”

Focus on Asia

IWG coworking brand, Spaces, is itself expanding in cities around the globe — including Asia — and has so far added more than 20 worldwide locations this year alone.

Spaces has recently opened coworking locations in Singapore, Japan and India, and has two more set to open soon in South Korea and Shanghai.

Likewise, WeWork has its sights set on Asia in a big way, thanks in part to multi-million-dollar investment and a joint venture with SoftBank. WeWork’s first Japanese location is set to open in Tokyo early next year, and it’s expected to be the first of many.

“We will be in Japan in a major way,” Christian Lee, managing director of WeWork Asia, told Bloomberg earlier this week.

“Given who our partners are, and given WeWork’s speed, you can expect to see buildings coming soon.”

WeWork is already in South Korea where it’s reportedly experiencing “robust growth” and, just like IWG’s Spaces, it has several other Asian locations either open or launching soon, including Beijing, Shanghai and Singapore.

But coworking growth in Asia is not a two-horse race.

Chinese coworking group UrWork announced on Monday that it has closed a $179million funding round, which currently values the company at US$ 1.5 billion.

This follows a $30million investment from Beijing healthcare group Aikang in July and six previous rounds of funding, totalling $175 million, and one merger — all since UrWork’s launch in April 2015.

Backed by significant investment, UrWork’s current portfolio (as of August 2017) stands at 88 workspace locations. The company plans to open another 160 locations across 32 cities worldwide over the next three years, reportedly covering more than 7million sq. ft.

Among them, UrWork’s new locations are set to include New York, Los Angeles, San Francisco and London.

Naturally, UrWork is a major rival of WeWork and the former’s local roots and connections are expected to pose serious challenges for any competitor, even one as well-backed as WeWork, to make a dent in the Asian market.

It’s clear that both brands mean business — but let’s not forget IWG’s Regus and Spaces.

The workspace veteran has more than 20 years’ experience over WeWork and a whopping 26 years over UrWork. IWG is building its own coworking empire via Spaces and while its growth in Asia may appear modest compared with its astronomically valued rivals, its global footprint is continually expanding. IWG is a long-standing flexible workspace giant and in any market, it will undoubtedly give WeWork and UrWork a run for their money.