IWG, which owns the Regus brand, is facing a backlash from customers who say that the workspace provider’s response to the crisis shows a lack of care and is an attempt to “profit off companies that cannot earn money during the crisis”.
The world’s largest serviced office operator has been accused of trying to profit from the coronavirus crisis by asking small businesses to sign up to longer leases in exchange for temporary rent cuts or deferrals.
More than 900 people have signed a petition calling for IWG to close its 320 UK centres and freeze rents and memberships or provide substantial discounts.
Customers have typically been sent letters offering a 50 per cent discount on rent for April and May if they commit themselves to paying rent for an additional three months at the end of their lease. Alternatively they can take a 50 per cent discount for two months and spread out the repayment of the rest over the remainder of their lease up to a maximum of 12 months.
James Vanner, 40, a partner at the law firm Vanner Perez Notaries, which rents workspace in London for eight employees, said: “We are looking to get out of Regus as soon as possible after this is over.”
IWG is the world’s largest flexible officer operator with 3,338 locations in more than 100 countries. Regus and Spaces are among the group of brands it operates. The company made a record annual pre-tax profit of £489.5 million in 2019.
Investors fear the near-total shutdown of the economy will destroy IWG’s rental income and its shares have fallen by more than a third since the start of March.
IWG said this week it expected the business to come under pressure as countrywide lockdowns were implemented. It is taking action to preserve cash by cutting capital expenditure, cancelling its final dividend and suspending a £100 million share buyback programme. The group’s board, including Mark Dixon, its chief executive and biggest shareholder, have decided to take a 50 per cent reduction in base salary and fees during the challenging period.
Responding to the customer complaints an IWG spokesman said: “We want to help our customers get through this difficult time. Our customer service team is on hand to help anyone if their business is facing financial difficulty.”
It said it had asked staff to volunteer to continue to provide essential services at its centres, such as delivering post and performing IT and telecoms maintenance, including services that are used by customers working remotely. Those staff have been offered a stipend so they do not have to use public transport. Other staff have been furloughed under the government’s coronavirus job retention scheme. IWG would not confirm how many employees had been put on the scheme, which funds 80 per cent of an employee’s salary for up to £2,500 a month.
The firm is asking for concessions from its own landlords. One London landlord said Regus had asked for a three-month rent freeze starting in April in exchange for extending its lease by three months at the current rent. The offer was said to be disappointing given that other serviced office operators, including the Blackstone-owned The Office Group, had paid all rent due at the end of March for the next three months. The Office Group and Wework have offered some customers rent holidays or alternative payment plans on a case-by-case basis.
IWG can expect to come under further public and political pressure if it fails to improve its engagement with customers, landlords and employees. Florence Eshalomi, Labour MP for Vauxhall, said: “I think it’s an absolute disgrace what they are doing and they should be doing a lot more to support their customers at this time. We have got so many small businesses in Vauxhall and I would like to see Regus as a responsible company show it is helping their customers.”
