IWG Exits Russia, Expands in Hong Kong Amidst Global Real Estate Shifts

Global workspace provider IWG has announced its strategic withdrawal from the Russian market following the invasion of Ukraine, while simultaneously expanding its presence in Hong Kong by taking over space previously occupied by rival WeWork. This dual move reflects the company's adaptation to geopolitical events and evolving market dynamics.

Key Takeaways

• IWG is ceasing operations in Russia, citing the "right thing to do" amidst the conflict in Ukraine.
• The company is gradually pulling out of Russia, waiting for existing leases to expire.
• IWG is expanding its footprint in Hong Kong, taking over a significant co-working space abandoned by WeWork.
• The company reports increasing occupancy rates and pricing in its global operations outside of Russia.

IWG's Withdrawal from Russia

IWG, the parent company of brands like Regus and Spaces, has confirmed its decision to close its nine serviced office spaces in Russia. Mark Dixon, founder and chief executive of IWG, stated that the company has "cut all investment" in the country and is "pulling out gradually." The withdrawal is primarily driven by the ongoing invasion of Ukraine, with Dixon emphasizing that it felt like the "right thing to do." While no specific timeline was given, the company will exit as leases expire. IWG's Russian offices primarily served international companies, many of which have also scaled back their operations in the country. Dixon also noted that IWG is supporting companies that have relocated from Ukraine to other European countries like Poland, Romania, and Portugal.

Expansion in Hong Kong

In a contrasting move, IWG is expanding its operations in Hong Kong. The company is set to take over a substantial 32,000 square feet of co-working space at Hysan Place in Causeway Bay. This space was previously occupied by its rival, WeWork, which vacated the premises in April. WeWork's departure is attributed to the uncertain economic outlook, which has led potential tenants, often small businesses and startups, to reconsider their commitments. Reports suggest that IWG will secure this space at a lower rental rate than WeWork previously paid. IWG plans to launch its "Signature by Regus" brand in Hong Kong at this new location, with the center scheduled to open in August. This expansion comes at a time when office rents in Causeway Bay have seen a decline, exacerbated by the Covid-19 pandemic and previous anti-government protests.

Global Market Performance

Despite the challenges in Russia, IWG's global operations outside the country are showing signs of recovery. Dixon reported that occupancy numbers are picking up, returning to approximately 75% capacity, a rate not seen since the beginning of the pandemic. Furthermore, pricing has also increased, as the company is no longer offering discounts to its customers. This indicates a strengthening demand for flexible workspace solutions worldwide.

Sources

• Serviced office provider IWG to close workspaces in Russia, The Times.
• Flexible workspace giant IWG takes over US rival WeWork’s abandoned office space in Hysan Place, Causeway Bay
  | South China Morning Post, South China Morning Post.