Office Space News
Regus Draws Ire of UK Property Managers
Published March 12th, 2010 by Jennifer LeClaire
If any publicity is good publicity, the Regus can take consolation this week in the United Kingdom stir around its brand. According to news reports, Regus has drawn the ire of property managers.
The British Property Federation, or BPF, has accused the serviced office space giant of a “cynical move” and is calling for changes to insolvency rules. Apparently, Regus is trying to get rent reductions from some property owners at its “loss-making” sites” and even secure rent-free periods and get cash from landlords to fund refurbishment work.
The Telegraph reports: “The company, led by chief executive and founder Mark Dixon, has warned that if its demands are not met then the vehicles holding the leases could go into administration, leaving the property owners, which include some of the biggest commercial landlords in the country, with an empty building.”
No Peace with Property Managers
This appears to be a cynical move by a highly regarded company, and is the first time a part of the property industry has used such tools against the rest, according to Liz Peace, chief executive of the BPF.
“Landlords are caught between rock and a hard place when it comes to bailing out occupiers at the expense of their shareholders or facing the prospect of empty space and the costs that come with it,” she says.
Peace is most disturbed that, as she explains it, despite the cuts in margins Regus has obviously had to face in recent times, they have a strong cash position and a profitable business. Then Peace asks a question: All firms have suffered in the recession so why should the shareholders of property firms – many of whom are likely to be pension funds – be bailing out badly negotiated leases or underperforming parts of another’s business?
“We need to see the insolvency rules tightened up to stop this kind of abuse and landlords need to think about asking for some kind of clawback if they make concessions to enable them to obtain some benefit from the upturn when occupiers they bail out come back,” Peace says. “Any firms looking to use these kinds of methods to restructure should remember that the industry is cyclical and what goes around comes around. They could find it difficult in the future to secure they kind of terms they want when landlords are in a position to get tough.”
Regus Speaks Out
What is Regus’ response? Regus is holding its line on the matter. In a published statement attributed to a Regus spokesperson, the company said: “As we stated at our half year results in August the UK is the toughest business environment of our geographies.
“Like many other companies with operations in the UK we are seeking to regear a small number of leases. However we remain fully committed to our operations in the UK where we have approximately 150 centers. We will continue to grow our leadership position in the UK and are contracted to open six centers in the next two months.”
How will the story end? Will Regus make peace with Peace, the British Property Federation and the property managers in question? Or will the stir cause bad blood between Regus and its landlords?
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Elizabeth Sanchez March 12th, 2010 at 9:13 am
Ouch. What a tangle. I’m not sure this is the kind of publicity Regus really wants. Then again, this is all property industry controversy that probably won’t make its way down to the end user. So long as Regus continues serving quality serviced office space to business users, I’m not sure they care what kind of squabbles the brand gets into with landlords.
Bill Brookshire March 12th, 2010 at 9:57 am
Those are some pretty strong accusations around Regus. Looks like they took it in stride, though. These are the types of behind the scenes industry arguments you see in any industry. It’s always interesting to see the dirty laundry aired in public. I suppose Regus competitors could use this as leverage in negotiating new leases with landlords, e.g. “We won’t do what Regus did…” but other than that it shouldn’t hurt the company in the public eye.