As working practices change, flexible property providers are expanding their reach, offering greater variety in place, budget and time. Heather Greig-Smith talks to Regus chief executive Richard Morris about the future of office space.
Should you need to send some emails while driving along the M4, or print a document and call your team leader when doing a spot of shopping in Plymouth, finding a flexible office to stop into isn’t as hard as you might imagine. Nestling alongside Starbucks and the petrol pumps, Regus Express lounges offer a growing number of drop-in workspaces. The company also increasingly rents desks for co-working for varying numbers of days a month as individuals and corporates seek new ways of working.
With just under 350 sites across the UK, from Aberdeen to Plymouth, Regus is taking its flexible working proposition to ever more diverse locations in an attempt to capture what UK chief executive Richard Morris terms a “workplace revolution”. The company is akin to the Tesco of co-working space – aiming for maximum geographical coverage and to cater to every size and budget.
Globally it has 3,000 locations in 900 cities and 120 countries. The UK is the second largest part of the group after the US but this doesn’t mean it has reached the height of its growth. “We will continue to focus on being the leader in flexible workspace provision,” says Morris, sitting at a meeting room table in the one of the company’s many west London offices. “The UK is a well-established market but one that has the potential for growth and a unique national network.”
Drop-in or serviced office?
The co-working and drop-in aspect of Regus’ business currently accounts for only 5% of its revenue, with the bulk coming from companies taking flexible leases on offices or Businessworld memberships for their teams, allowing them to work in multiple locations. Morris says workplace change and the need to cater to a mobile, flexible workforce is increasingly underpinning the real estate choices made by large corporates.
He joined the business from security outsourcing group G4S a year ago, and says that even in a short space of time, the company’s position in the world of real estate has changed. “We find ourselves having conversations now with people that we wouldn’t have been able to have three or four years ago, including with big corporates who are looking at outsourcing their property requirements, and big property owners who are looking to Regus to manage their properties for them. It’s a fast-evolving space, both in terms of the customer side and property owners who are looking to do something different with their assets.”
This trend is something he believes will accelerate. “We would expect to continue to see the adoption by larger companies of flexible space into their real estate strategy. I think that will gather momentum.” He uses Google as an example – two-thirds of the internet giant’s buildings are Regus locations and the idea that the company would set out to acquire buildings or even take on long leases, is alien. “These types of business recognise how fast-moving the world is and see that signing up to a 10 or 15 year property lease is ridiculous. No business has a ten or 15 year business plan.”
Vital to the Regus business plan is increasing variety in its spaces – even within the same towns, cities and sites. Morris says there is no typical Regus customer and refuses to name one target area – the company intends to focus both on small and large businesses. A deep and broad network of spaces means it can aim to offer clients options wherever they travel and whatever their changing needs. Currently, 10-15% of the UK users also use Regus offices internationally, another possible area of growth.
Around 60% of Regus customers are small and medium-sized enterprises. Morris is acutely aware that 98% of the UK’s businesses are small and that the recession has driven many towards freelance careers. “There is an increasing trend for small companies and entrepreneurs looking for workspace solutions that are flexible and give them the freedom to grow,” he says.
“We can see that there’s an opportunity to capture an unfulfilled demand for co-working. It’s a good step between home working and making a larger commitment. Our philosophy is to have space that is available for the full spectrum of different budgets in different places.” He adds that Regus is extending its portfolio to offer non-office spaces such as shops and clinical space.
Despite this, Morris expects the balance to shift slightly towards larger clients. “In five years’ time I suspect we will have a more even spread between large corporate clients and small independent companies. We see more and more large organisations adopting agile and flexible working practices and at the same time wanting to reduce costs of real estate,” he says.
Scratching the surface
The company has a front seat in the theatre of workplace change – witnessing the programmes that are taking place in organisations to alter working practices. “Like any organisational change you need it to be sponsored at a senior level but it tends to be popular with people. At the employee level the opportunity around improving employee retention and using flexible working as a way to attract talent is quite compelling,” says Morris.
He adds: “I still think we’re just scratching the surface. It’s a minority of large companies doing this with the sole purpose of improving employee engagement, and attracting and retaining top talent. In the hierarchy of motivations [it comes below] saving money.”
As the competition increases in the flexible property space, so companies have to ensure a high-quality, distinctive environment – a desk and a phone line isn’t enough. “In the last five years we have invested heavily in the drop-in format,” confirms Morris. “It’s not just having something that’s fit for purpose but that creates a very strong first impression and is a great place from which to work.”
“We’re trying to create different zones, from privacy and quiet through to more active interaction and collaboration,” he says, adding that this has been brought to life in the company’s new London Bridge location (pictured below).
Morris doesn’t appear worried by rising levels of competition in the sector. “Having breadth and diversity is a good thing. It drives innovation,” he says. “There is a high quality of competition that we have respect and admiration for and we’d be happy to learn from.”
It’s easier to be sanguine about the competition in a growing market. Morris believes supply is increasing in line with demand for flexible space – in the last three to four years London has seen hundreds of new spaces opening. Outside London demand is not as fast-growing and yet new providers are still springing up in and around regional cities. Regus is targeting new territories beyond the capital, having opened in Hull, Coventry, Southampton, Ashford and Welwyn Garden City this year.
“We’re looking at the UK almost on a pinpoint basis and identifying where we think there is unmet demand,” says Morris. A key part of plan for this year is to open first offices in larger towns and cities that don’t currently have a Regus presence. “Although we have a large network of locations there is a concentration around London and the South-East there are lots of quite large towns and cities in the rest of the UK where we believe there is unfulfilled demand. That’s what we’re focusing on.”
Managing demand
With the increasing flexibility even in the already flexible Regus portfolio, is managing use and demand an issue? Morris likens the challenge to that experienced by gyms. “It’s like any subscription business,” he says. “You have to strike the balance between the capacity that you have available and how many people you’re giving access to. If they all drew down on that capacity at the same time? It’s unlikely. We look at our membership levels, we make sure that the capacity is available to service all of the membership. I can’t think of any occasion where we have not been able to provide space on the basis that was agreed with our customers. It’s an ongoing thing. You have to keep managing it.”
He adds that as the network grows, new locations can absorb the demand. “It’s not all about just absorbing growth into an existing level of capacity.”
Regus has also partnered Hilton hotels and is opening spaces and ‘thinkpods’ in their conference and meeting rooms. “It’s an opportunity to work with them and bring their locations into the Regus flexible workspace network. That might be one way in which we look to make space more accessible,” says Morris, hinting that there is much more to come using this network.
The uniting theme behind these ‘third place’ expansions into airports, motorways, hotels, and shopping centres is movement. “It’s about capturing people on the move – people who usually need to set down for a short period of time, maybe meet someone half way,” says Morris.
As a barometer for business change, the expansion of a business such as Regus points to significant movement in the way we work in future. Previously a niche property sector, it is pushing the boundaries of location and space.
Richard Morris: the CV
2014: Becomes UK chief executive of global workspace provider Regus
2007-2009: Completes G4S global leadership programme, Manchester Business School
2003-2013: Joins security solutions group G4S as commercial director, becoming managing director, group managing director and then UK & Ireland chief executive in 2012.
1999-2003: Divisional finance manager for facilities management business Romec
1996-1999: Joins Royal Mail as a trainee accountant, becoming finance manager in 1998.
1993-1996: University of Liverpool
My working day:
I mainly work in London but would prefer to get around the UK a bit more. My working life is conventional: generally working 7am-7pm, Monday to Friday. It’s busy during the week but I have a young family so need to stop at weekends.
Half of my team are co-located and half work elsewhere – some in Belfast and some in the Midlands. At Regus is we’re not dogmatic about people working in fixed locations. We make good use of telephone and video conferencing. Even with the global dimension of the business, people aren’t flying around the world all the time, which is very disruptive to work-life balance. It’s healthy that we don’t operate that way.
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