Office Space News
Wall Street Journal Outlines Regus Woes
Published March 18th, 2010 by Jennifer LeClaire
Regus has landed itself in a Wall Street Journal article. But the serviced office giant might not appreciate the headline: “Regus Hits Rough Seas.”
The story begins by stating how Regus had hoped the recession would drive new business as companies looked to slash office space costs. Then comes the “but.”
“But Regus has been among the multitude of companies that have been hurt by the downturn. Regus’s profit fell last year, as the recession put pressure on occupancy and pricing, and earnings are expected to be lower in 2010. While businesses are rethinking space needs, that hasn’t made up for the job losses due to the recession and the falling demand for office space in general,” The Wall Street Journal reported.
The article quoted Regus CEO Mark Dixon explaining that the serviced office business is not “plain sailing” and that the global recession is causing the company to lose customers. It’s a chink in the armor of a major executive suites brand, and could signal similar struggles from smaller privately-held companies that aren’t required to disclose their earnings.
At the same time, the serviced office industry is seeing a move toward virtual offices, which some feel could cannibalize physical office space rentals. Nonetheless, many brick-and-mortar executive office suites companies are rolling out virtual office platforms to tap into the demand, hoping customers will graduate to physical office space.
One thing Regus has that some other serviced office companies don’t is cash – and plenty of it. The Journal reports that Regus has £230 million that could help it ride out the recession. Meanwhile, Regus continues to expand into new markets, preparing for the rebound. Dixon told the Journal, “We are always negotiating leases.” Since Regus works with industry giants like Google, GlaxoSmithKline and Nokia, it’s likely that these companies could expand their office space when the economy recovers.
I wouldn’t worry about Regus too much. The company learned plenty in the last recession that’s probably helping it make wiser decisions this time around.
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Bill Brookshire March 18th, 2010 at 11:35 am
The Wall Street Journal always does such a thorough job of looking at industries. I am glad to see the newspaper scrutinizing the serviced office industry. That’s actually a good sign. It means business centers are on the radar screen of Wall Street. I think Regus will weather the storm, but it’s interesting to see that they are struggling like so many other businesses.
Elizabeth Sanchez March 18th, 2010 at 11:49 am
I don’t know how 230 pounds translates to U.S. dollars, but I think that’s almost double… that’s a lot of cash. No wonder Regus is expanding so rapidly. I think Regus is more than well able to go through the recession and emerge just as dominant, if not more dominant, than they are now. Once the economy starts growing again, Regus should be in a good position.
Daniel Kaneshiro March 25th, 2010 at 7:42 pm
I think Regus is too “traditional” and could not react quick enough to the changing environment that they helped pioneer. The 41% drop in profit came while only losing 1% occupancy. The customers they are losing is the opportunity that smaller regional operators can capitalize on. What you gain in this economy you will never lose, but what you lose in this economy you will never regain. it’s office Darwinism playing out.