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IWG's share-office space at Hysan Place in Causeway Bay. Photo: Handout

Hysan Development, IWG form flexible office joint venture as Hong Kong landlord eyes Greater Bay Area market

  • The joint venture will acquire and operate IWG’s 32 existing locations and the Regus, Spaces and Signature brands across the Greater Bay Area
  • Hong Kong’s office rents have declined by a quarter from two years ago as demand for office space has fallen because of remote working arrangements
Hysan Development is expanding into the shared-office market in the Greater Bay Area through a joint venture with IWG, the world’s largest flexible workspace operator, as it seeks to cash in on the growing trend of remote working arrangements by companies who are looking to contain costs.
The joint venture will acquire and operate IWG’s 32 existing locations and brands across the Greater Bay Area, Hysan said on Monday, without disclosing its investment in the venture.

Sixteen of these shared offices are in Hong Kong, which are operated under three brands – Regus, Spaces and Signature.

“The workspace ecosystem is fast evolving to better meet end users’ needs and expectations, and flexible workspace will play an important part,” said Ricky Lui, chief operating officer of Hysan Development. “The joint venture reflects our confidence in the economic growth of the Greater Bay Area.”
IWG’s Signature brand last year took over 32,000 sq ft of space vacated by WeWork at Hysan Place. Photo: Dickson Lee

Hysan has market value of HK$30.8 billion (US$3.95 billion) and ranks among the biggest office landlords in Causeway Bay, the city’s prime commercial district.

The formation of the joint venture comes as Hong Kong’s office rents have fallen by a quarter from two years ago. Demand for office space has reduced as remote working arrangements have taken hold across the globe as companies implemented social distancing to prevent the spread of Covid-19 and cut costs.

“In the wake of the pandemic, we are seeing record levels of demand as companies embrace hybrid work and rethink their real estate strategy,” said Mark Dixon, founder and chief executive of IWG.

Some of big office users like HSBC and Standard Chartered have accelerated the shift towards remote working.

HSBC has downsized its global office footprint by 10 per cent since January 2020 as it has adopted a hybrid model of splitting work between the office and home, the bank said during its half-year results announcement on August 1.

In February, Standard Chartered signed an agreement with IWG giving its 85,000 employees globally access to IWG’s 3,500 offices around the world for a trial period of 12 months.

The newly emerging flexible office trend is pushing landlords to seek greater exposure into the sector to diversify from their core business, analysts said.

“Operators with a strong track record of successfully running flexible workspace locations, at scale, are more interesting for investors, particularly operators with a robust client base and potential to tap into the corporate real estate market, which IWG certainly have,” said Jonathan Wright, director of flexible workspace consulting at Colliers.

Hong Kong’s co-working sector set to stabilise, recover as balance returns after years of unbridled expansion

Almost all of Colliers’ clients were looking at ways to incorporate flexible offices into their real estate strategy, he added.

Hysan said it would continue to expand IWG’s brands in the growing flexible workspace market in the region.

Currently, more than 10 per cent of Hysan’s 2.5 million square feet of prime office space in Hong Kong’s Causeway Bay has been leased to different flexible workspace operators, including IWG.

Last year, IWG’s Signature brand took over 32,000 sq ft of space vacated by rival WeWork at Hysan Place. IWG’s Spaces brands operates a flexible location at Lee Garden Three.

Hysan’s other co-working operator tenants include The Desk at One Hysan Avenue, and WeWork and Compass at Lee Garden One.

This article appeared in the South China Morning Post print edition as: Hysan Development hopes to cash in on growing trend for remote working