Flexible office space provider Regus recently announced it has put six of its New York City locations into bankruptcy, according to The Real Deal and multiple news outlets. The company has now sought Chapter 11 protection for almost 100 of its flexible office spaces across the United States.
Four of the six locations Regus recently put into bankruptcy are in the Midtown—Paramount Group’s 1325 Sixth Avenue at 53rd Street, Levin Properties’ 1501 Broadway in Times Square, Brookfield Properties’ 424-434 West 33rd Street in Manhattan West and EQ Office’s 1740 Broadway at 56th Street. The other two flexible office space locations are at Normandy Real Estate Partners’ 175 Pearl Street in Dumbo and Jamestown Properties’ Falchi Building at 31-00 47th Avenue in Long Island City.
The COVID-19 pandemic is the main reason Regus has had to recently scale back its locations, according to The Real Deal. Switzerland-based IWG, Regus’ parent company, recently said it will speed up its plan to cut 4% of its global portfolio due to pandemic.
“Whilst the COVID-19 pandemic continues, we expect our third quarter to be particularly challenging,” IWG Chief Executive Mark Dixon wrote in an August report. “We therefore remain sharply focused on maximizing further cost savings in the coming months.”
Not every Co-working company is abandoning locations
There are still some flex space firms that are expanding and one of them is CommonGrounds. The San Diego based firm is growing and expanding with multiple new locations in Atlanta, Washington DC and Philadelphia among others. Their CEO, Jacob Bates spoke exclusively to Connected Real Estate about their philosophy in light of the Regus closures.
“CG is the leading flex-office operator built for times like this. As companies look to diversify their options between HQ, flex and working from home, they need to look at this like a stock portfolio and be diversified in their approach to locations. Fortune 1500 companies are our main potential users and they are still in the market right now. We think that as we come out of the lockdown that our model has great potential for growth and time will prove that to be true” said Mr. Bates.
Regus’ financial woes might raise questions about the rest of the industry’s sustainability during the pandemic. Regus is the world’s largest flexible office space provider in the world. The company has 10 times as many locations as WeWork, which was experienced its own troubles recently that include hiring two chief financial officers in a six-month span. It appears that Regus might simply be using this time to close laggard locations that may not be profitable and just don’t make sense.
If the biggest flexible office space provider on the planet has had to put numerous locations into bankruptcy due to COVID-19, what’s happening to the rest of the industry? Just last month, it was reported that Knotel, which sublets furnished office space to businesses saw its revenue decrease almost 20% during the second quarter. The company plans to decrease its portfolio by 20% and has already bought out some of its leases. A lot of the sites the company put into bankruptcy are in major metropolitan areas like New York, Chicago and San Francisco, all of which the Coronavirus impacted. Even as the pandemic subsides, the company believes clients will opt to work in suburban offices closer to instead of in dense business areas.
The future of Flex space and co-working may be brighter than everyone thought. Stay tuned to see how all this turns out.
Joe Dyton can be reached at firstname.lastname@example.org.