Editor's note: Since 2024, new quality productivity has become the core issue of China's economy, and the digital economy and technological innovation are the main driving forces, and all walks of life are looking for a path of high-quality development.
In response to changes in the industry, the Boao Real Estate Forum will be upgraded and expanded to "Boao Week" covering the entire industry chain, and a new series of reports on the "2024 Boao Visit" - "Boao New Power" will be planned and launched.
Through research and exchanges, in-depth interviews and dialogues with representative enterprises in the whole industry chain, we will explore the new power of the new cycle. It is expected that these forces will become a rolling torrent and drive the new development of the industrial chain and economy.
As part of the "Business Chapter", we use interviews, surveys and research to unpack companies and representatives of the commercial real estate, retail and consumer sectors, and tell their thoughts, thoughts and gains during the historical development opportunities of the new industry.
"After the epidemic, people's office habits have completely changed. "Hu Mao, President of IWG Group China, has long been keenly aware of the new changes in the workplace industry.
In recent years, under the dual impact of the epidemic and economic transformation, office space has been idle, working from home has become a new habit, and the loss of existing tenants has surrounded the entire industry.
However, as a veteran expert in the flexible office industry, IWG Group has always had an accurate observation of market fluctuations and found new market space in the turmoil of the industry.
Traditional office methods cannot avoid shortcomings such as vacant desks, wasted space, and high rents, and home office faces many distractions and difficulty concentrating.
"There was a compromise between traditional centralized work and remote work from home, and that was IWG's flexible workspace."
Since Mark · Dixon founded Regus in 1989, the IWG Group? It has set up nearly 4,000 office centers in more than 1,200 cities around the world, and has more than 30 years of operational experience and rich multinational company resources.
"The current market situation is a very good time for IWG Group to expand." With the center stage, what kind of new chapter of flexible work will it bring?
Dance on stage
In the early days, IWG Group's path to asset-light expansion was not recognized by many owners. In the past office market, owners mostly entered as real estate developers, and adhered to the traditional rent-collection model in terms of operational thinking.
However, in the face of persistently high vacancy rates, both office landlords and "second-hand landlord" office brands have continued to decline in revenue, and the traditional rental model has not adapted to the changes in today's market.
"The owner's leasing business model has shifted from incremental real estate development to the operation of existing buildings, and they have realized that they must hire professional people to do professional things." This is Hu Mao's summary of the current situation.
Due to the economic downturn, the demand for office space is shrinking, and the tenants of large areas of traditional office buildings are beginning to abandon the entire rental floor and move to flexible office space, becoming new customers of IWG Group to make up for the loss of original customers. At the same time, a large number of buildings are being left unused, giving IWG Group plenty of room to expand in the market.
With the increase of IWG Group's brand influence in China, after large enterprises adopt the hybrid office model, the finely decorated small area flexible office space has become the first choice for these enterprises.
As a result, more and more office owners have begun to accept the concept of flexible office advocated by IWG Group, and are aware of the demand for flexible office and market trends arising from the changes in corporate office layouts.
"IWG Group is not a second landlord at all now." Hu Mao happily introduced to Guandian New Media: "Now the model of expanding new outlets has changed to an asset-light model, and it is necessary to empower the owner's office space with more than 30 years of operating experience, the operating system of more than 4,000 office spaces around the world, and the global customer resources and market recognition of the IWG brand." ”
Based on the acceptance of the asset-light model and the optimism about the future of flexible working, Hu Mao said: "In the future, IWG Group's flexible office outlets will not only cover different cities, but also cover different areas of a city. ”
In terms of domestic layout, IWG Group's flexible office outlets not only cover first-tier cities in Beijing, Shanghai, Guangzhou and Shenzhen, but also in the past two years, the trend of sinking to third- and fourth-tier cities has become more and more obvious, and it has settled in new cities such as Taizhou, Tangshan, Changchun, Weihai and Shangrao.
In first-tier cities, IWG Group's strategy is to weave a dense web, not only in the CBD in the city center, but also to expand the sub-center area and suburbs.
In this dialogue with Guandian New Media, Hu Maoxuan was selected in China's first Regus Reserve Signature.
IWG's most high-end brand, Regus Reserve Signature is located at the Jin Mao Tower in Shanghai, and across the street from the Shanghai Tower, another brand, Regus, also houses Spaces in Xintiandi.
This begs the question: wouldn't it be possible for several projects to be so close together that they would not form a competition?
Hu Mao explained to Guandian New Media that this is the expansion strategy of IWG Group, not only to expand the layout of its office outlets, but also to weave a dense network. In 2023, IWG Group will have 867 new outlets worldwide, and more than 500 new outlets in the first half of 2024. In the past 18 months, the number of newly signed domestic outlets has also exceeded 50, taking advantage of the rapid expansion of the industry's cold winter.
Thanks to a brand matrix covering the low-end to the high-end, the IWG Group is able to set up locations in different cities and regions. The cost-effective HQ brand is deployed in the fringe areas of third- and fourth-tier cities or first-tier cities, and the mid-to-high-end Regus and Spaces brands are mainly promoted in first-tier cities, and the highest-end brand Regus Reserve Signature brand has just entered Chinese mainland and is located in Lujiazui.
In its relationship with its owners, the IWG Group wants to form a complementary rather than competitive relationship.
Therefore, IWG Group's office outlets are all small-area finely decorated products, mainly promoting 4-8 room space with small rooms; If it is a large-scale project, it will affect the owner's own leasing business, but form a competitive relationship with the owner, which is not conducive to the subsequent development of the project. Small-area projects can complement the owner's large-area projects and jointly improve the leasing situation of office buildings.
Ten years of work off the stage
One minute on stage, ten years off stage.
Now the global office industry is in decline, such as the San Francisco office vacancy rate in the United States reached a record high of 34.5%. IWG Group's rise against the cold winter of the industry is the result of more than 30 years of dedication to the office sector.
IWG Group's operational capabilities are the backbone to expand against the trend.
After entering the stock era, project operation has become the main way of growth, and most office owners do not have professional operation capabilities, and need third-party professional operators to help operate idle office buildings.
After two years of hard work, IWG Group's business is now asset-light, providing agency operation services and brand empowerment to owners. Operating in an asset-light model, IWG Group can provide the owner with a renovation plan, which will be implemented by the owner and handed over to the IWG Group after the transformation is completed.
In the cooperation, IWG Group and the owner agreed that the project management fee is linked to the actual operation situation to protect the interests of both parties.
According to Hu Mao, the management fee of IWG Group is divided proportionally according to the total revenue of the office center, including platform services and brand management. Among them, the platform services include the provision of customer service systems, IT services, CRM systems, and pricing systems for office spaces.
Generally, the owner only owns a few scattered office buildings, which is difficult to form economies of scale. When the investment is not proportional to the benefit, it will not be dedicated to creating an operational system for the office space.
With more than 4,000 centers, 8 million customers and a huge operating database, IWG Group can build a service system dedicated to the IWG platform, which can give full play to the advantages of economies of scale and reduce operating costs.
With the exclusive platform service system and operation database, it can also empower the ability to attract investment. For example, after more than 30 years of accumulation of global large customers, 80% of the world's top 500 are global contract customers, the introduction of existing customer groups can alleviate the owner's demand for vacancy rate, and every 4-5 centers will be equipped with special sales staff to carry out local promotion and investment.
Hu Mao also introduced to Guandian New Media that the state-owned platform has now become the main object of IWG Group's business expansion. On the one hand, state-owned platforms have a large number of idle office buildings that need to attract investment; On the other hand, some local governments or state-owned enterprises have introduced IWG Group office space, hoping to attract foreign investment through international platforms.
In addition, focus is at the heart of IWG Group's operating philosophy: "Only do flexible work, nothing else".
During the period of rapid development of co-working space, many co-working brands have introduced non-office elements such as dining, fitness, and entertainment into the office space. However, with the passage of the industry, non-office elements cannot create revenue for public space, but squeeze profit margins.
"The goal of the IWG Group is to develop more points, rather than implanting all kinds of content that we are not good at in one point." Hu Mao believes that the industry has a specialty, and the introduction of elements that are not good at the office space will not generate additional income, but will distract attention and increase costs, which is contrary to IWG Group's positioning of creating a small-area finely decorated flexible office space, and there are more professional operators to provide other business services externally, which will create unnecessary competition.
In the past two years, IWG Group has laid out non-main urban areas in central cities and sinking third- and fourth-tier cities, and Hu Mao found that there was a difference between the original product design and the needs of local enterprises, and the localization of office space has been put on the agenda.
"IWG Group needs to understand the office needs of its customers in China and adapt its existing products locally."
Hu Mao cites tea as an example, at present, the office center provides tenants with mainly coffee, and the introduction of professional coffee machines, but for local enterprises, customers may not need coffee, but tea, especially in southern Fujian and Guangdong. However, there is currently no tea space in the office center, and standard meeting rooms may be converted into tea rooms in these areas in the future.
"There is a great deal of certainty in the development of flexible office business needs, because the traditional form of office has undergone profound changes, and the trend of decentralized flexible office is a very clear direction of change."
Hu Mao is convinced that under the changing trend of office demand, the light-armed IWG Group has stood in the center of the stage.
The following is an excerpt from the interview with Mr. Hu Mao, President of IWG Group China:
Viewpoint New Media: With the vacancy rate in the commercial and office market rising this year, does IWG Group feel that there are more opportunities?
Hu Mao: After the pandemic, people's office habits and companies' office layout strategies have completely changed, and many people are reluctant to return to their offices in office buildings, resulting in a significant increase in vacancy rates.
This situation is a positive for the hybrid work promoted by the IWG. The so-called hybrid office includes various forms of office, including traditional centralized office.
There must be a compromise between traditional centralized work and remote work from home, and IWG Group's flexible workspaces fill this gap.
Of course, the impact of the overall economic environment is still very large. Due to the economic transformation and weak business, some customers who have settled in IWG Group office centers may have a smaller demand for office space, and some may withdraw their leases, which is a negative impact.
However, IWG Group also sees a new opportunity, in the past, the company could not completely cut the team of traditional office building leasing customers, and in the process of downsizing, some employees or office space will be put into flexible office space.
There are both negatives and positive opportunities, so I think it's a good time to expand IWG's global presence.
In 2023, IWG signed 867 new centers globally, and more than 50 new centers in China in the past 18 months.
Perspectives: Has IWG's flexible working concept been embraced during the expansion?
Mao Hu: In terms of expansion, IWG Group feels that this is a very good time to set up a new center, because there are a lot of vacant buildings and owners are thinking about improving occupancy rates.
Now that more and more landlords are embracing IWG's flexible office concept, many large companies have adopted a hybrid working model, and the number of well-furnished, small-area flexible office tenants will also increase. Therefore, landlords are aware of the need to divide traditional large-scale leasing into hardcover small areas to attract more flexible office demand, and are increasingly optimistic about the development of this part of the market.
Many owners do not have the ability to operate themselves, and they value the global influence of IWG Group.
IWG operates nearly 4,000 centers around the world, accumulating many global customers, 80% of the world's top 500 companies are IWG's global contracted customers, and the number of platform customers has reached 8 million.
This asset-light model was not recognized by many owners in the past few years, they felt that they were real estate developers, and their thinking was still the traditional rent-collecting model.
Viewpoint New Media: What is the current business operation model of IWG Group?
Hu Mao: Now I don't want to be a second landlord at all.
With more than 30 years of operational experience and the underlying operating system in more than 4,000 centers across the country, coupled with global customer resources and market recognition of the IWG brand, we can empower and operate a variety of spaces.
Now it is mainly for operation and brand output, and it is responsible for the operation and management of the business space in the building.
IWG Group is able to leas, especially with international clients who have a high level of recognition of our brand. In this way, we can take advantage of the advantages of leasing to empower the landlord with operational experience and customer resources to help operate the idle space.
Many owners feel that they can do it at first, and they can decorate and design the building. In fact, after two or three years of operation, they will find that this business requires a lot of manpower, and there is no way to expand the source of customers, and it is limited to the scope of one building or several buildings, and it cannot form a scale effect. Without economies of scale, it is impossible to invest a lot of energy and resources.
Viewpoint New Media: Now some office projects have introduced elements such as commercial and apartments, what do you think about this?
Mao Hu: The IWG Group's strategy is to focus on the office and not do anything else.
We don't do restaurants, gyms, etc., because that's not our specialty, and there's a lot of third parties out there doing fitness, catering, so IWG Group focuses on running office space.
Our latest development strategy is to deploy more locations, more network systems, and be able to set up flexible office centers in different areas, so that the network is bigger and denser, rather than implanting everything in one point.
There is a specialization in the art industry, and adding things that you are not good at is actually not profitable and distracting. If it can't be formed, the cost is relatively higher, and it is not easy to do a good job in attracting investment and training.