Flexible office provider IWG and retail and office landlord Hysan Development will form a joint venture with the exclusive right to operate all IWG brands in Hong Kong and throughout the Greater Bay Area, the companies announced Monday.
The JV will acquire and operate IWG’s 32 existing Regus, Spaces and other locations in Hong Kong, Macau and mainland China’s Guangdong province and continue to expand the business presence of IWG’s brands in the region, HKEX-listed Hysan said in a press release.
No details were disclosed about the JV’s structure. But the deal typifies IWG’s ongoing shift towards an asset-light franchise model, as the Swiss firm continues to sign up partners and sell franchises linked to its growing flexible office network.
“In the wake of the pandemic, we are seeing record levels of demand as companies embrace hybrid work and rethink their real estate strategy,” said IWG founder and CEO Mark Dixon. “Partnering with a leading local developer like Hysan, with whom we have built a strong relationship over many years, will enable us to scale up more rapidly to meet this demand across the GBA.”
Hysan, one of the biggest landlords in Hong Kong’s Causeway Bay, worked with IWG last year when the office operator took up 30,000 square feet (2,787 square metres) of workspace at the Hysan Place skyscraper in the premier shopping district.
The Hysan space had been vacated by WeWork after a failure to open a centre in the tower, establishing a pattern of IWG snapping up its competitor’s abandoned hubs throughout the city, including locations at The Gateway in Tsim Sha Tsui and The Quayside in Kowloon East.
And while WeWork has struggled after cancelling its 2019 IPO and falling out of favour with investors, IWG has inked deals to provide flexible office space in the region to employees of UK-based bank Standard Chartered and Swiss food giant Nestle. The maker of Nespresso coffee and Kit Kat bars is allowing its mainland China employees to work remotely from any of IWG’s 3,500 locations worldwide.
Hysan chief operating officer Ricky Lui said the joint venture reflects the developer’s confidence in the economic growth of the Greater Bay Area.
“The workspace ecosystem is fast evolving to better meet end users’ needs and expectations, and flexible workspace will play an important part,” Lui said.
The joint venture looks mutually beneficial for the kings of Causeway Bay and their European partner, said Jonathan Wright, director of flexible workspace services for Asia at Colliers International.
“IWG and Hysan together forms a robust platform for growth and allows Hysan to gain exposure to the sector working alongside IWG, who have the operational expertise and global customer base,” Wright told Mingtiandi.
London-listed IWG announced in September 2019 that it was making available franchise opportunities in Hong Kong. The news followed the launch of the company’s franchise programme in Singapore and the sale of its Japan business to TKP Corporation for £320 million ($446 million) in April of that year.
In a conference call with analysts and investors at the time of the Japan transaction, IWG’s Dixon said the firm intended to sell “pretty much all” of its global operations via similar deals.
“IWG will become more valuable without its assets than with its assets,” the CEO said in remarks cited by the Financial Times.