UK office demand is ‘shifting to the suburbs’ amid Covid-19 crisis

The Covid-19 pandemic has prompted a shift from big city centre offices to smaller suburban work hubs, according to IWG, the world’s biggest flexible workspace provider.

Over the past month, the company, formerly known as Regus, has experienced a surge in interest in flexible office space outside the big cities, as well as its homeworking packages, which include furniture rental, insurance, telecoms lines, video conferencing, stationery and repairs.

“It’s a pivot into the suburbs and the rings round London, Birmingham and Manchester,” said Mark Dixon, the IWG chief executive. “The amount of interest in home working and local solutions has gone off the charts.”

Two-thirds of IWG’s 3,500 offices around the world are in suburbs and smaller towns, and one third in bigger cities. The firm has about 350 offices in the UK, 60% of them in suburban or in small towns.

A gradual shift towards the hub-and-spoke model – where companies have their headquarters in a big city such as London or Birmingham and smaller satellite offices in the regions – was under way prior to the crisis, but the pandemic has given this a big push.

“People have tasted the relative luxury of not having to commute,” Dixon said. At the same time, companies still need to have offices that staff can drop in for social interaction, meetings and business reviews. “You don’t want to meet people in your front room or bedroom.”

IWG has office space in more than 1,100 towns and cities, while its struggling rival, the office space startup WeWork, has focused on big capital cities such as New York and London.

However, IWG has not been immune to the Covid-19 crisis. The firm’s pretax losses from continuing operations widened to £236.5m in the first six months of the year, from £176m a year earlier. It took charges of £156m for credit losses and office closures, as it shrinks its portfolio by 4%.

The current quarter will be tough, but the firm expects things to improve in the fourth quarter.

“This global crisis has dramatically changed the ways companies will work. In the new world of working post Covid-19, offices will still be needed but there will be a greater requirement for more flexible space,” Dixon said. “Some of the big banks are thinking about it, Facebook – it’s pretty universal.”

More companies will have workforces spread out with more satellite offices, more employees working closer to home or continuing to work from home, he added.

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