Serviced office provider IWG has warned of a delay to its recovery as the coronavirus pandemic drags on, saying that underlying earnings for this year would be “well below” the level in 2020.
IWG has been hit hard by Covid-19 curbs, which have caused demand for offices to fall.
There had been early signs of a rebound at the start of the year as occupancy stabilised, prompting chief executive Mark Dixon to say “it looks like the worst is behind us”.
But in the profit warning issued on Monday, the company said the “overall improvement in occupancy across the whole group has been lower than previously anticipated as a result of the prolonged impact of Covid-19”.
It highlighted the effect of continuing lockdown restrictions on office bookings, and the emergence of new variants of the virus.
Shares in the FTSE 250 company were down 15 per cent in early trading in London.
IWG’s business model is similar to that of rival WeWork – it leases offices from landlords, divides up the space and lets it out on shorter term, flexible contracts to a range of businesses.
The company said it had received “unprecedented” demand for flexible working spaces, reflecting a shift in working life that has happened during the coronavirus era. Big firms such as auditor EY have told staff to expect to spend at least a couple of days a week working from home after the pandemic.
“The way companies use space has changed,” Dixon told analysts on a morning call.
S4 Capital, the digital advertising company run by Sir Martin Sorrell, said on Monday that it had terminated some leases as it moves to a "hybrid office" model – where it seeks one flexible location in each of around 50 cities worldwide.
Mr Sorrell told the Financial Times it had cut about 10 leases globally since the pandemic began, and will remove a smaller number over the next couple of years, reducing its overall lease count by around two-fifths. In London, for example, it is reducing its leases from three to one by next year.
Flexible work spaces – where businesses can scale up and down their footprint, rather than committing to occupying a whole floor, for example – are useful to be able to respond to business wins and losses, Mr Sorrell said.
S4 has become more flexible during the pandemic on commuting times and days in the office out of a desire to treat staff as “adults”, he added. – Copyright The Financial Times Limited 2021