Inside IWG’s shops-to-offices drive

As the crisis facing British bricks-and-mortar retailers continues to deepen, one company thinks it may have found part of the solution in a more far-flung place: a shopping mall in Napa, California. That is the site of a year-long pilot project run by flexible working giant IWG, where it has converted an empty retail space into a shared office under its Spaces brand. With a modular design – in which bosses can tweak the number of desks to fit the space as they please – the 21,000 sq ft workspace has been “one of the strongest location launches we have seen in recent times”, IWG’s chief investment officer Thomas Sinclair (pictured above) tells EG. Now, the product is coming to the UK. What is it? The retail-to-office concept is hardly a new one. In summer 2020, Unibail-Rodamco-Westfield was granted permission to convert two-thirds of Westfield London’s House of Fraser store into office space. Just last month, Marks & Spencer announced a similar plan for most of the floorspace of its flagship Marble Arch store. But IWG wants to bring it to scale. Sinclair says the company is targeting an eventual roll-out of “many hundreds, if not thousands” in the coming years. The workspace provider has already earmarked dozens of sites in the UK for conversion, as revealed by EG earlier this month. Many of these are in “very advanced” talks with landlords. With around 15,000 retailers having closed their doors since the coronavirus pandemic began, according to the Centre for Retail Research, the retail-to-office product could help plug the new-found gaps on Britain’s high streets – particularly if competitors such as WeWork follow suit. “We see this as a core amenity for some of these retail locations,” Sinclair says. “And that is absolutely how landlords are thinking about it as well. They want the ability to repurpose some of that vacant space.” [caption id="attachment_1087139" align="aligncenter" width="847"] IWG converted empty retail premises into a shared office under its Spaces brand at First Street Napa in California[/caption] Regional roll-out Crucial to IWG’s plan is the location of these sites. Sinclair says it is targeting regional towns and shopping centres, ahead of an anticipated surge in demand for closer-to-home offices after the pandemic. The Napa Valley offer is located in a premium shopping and dining complex – First Street Napa – in a downtown area. “Napa was a great test location for us,” he says. “It is a dormitory town in the States where workers live while commuting into Silicon Valley or the Bay Area. But many wanted a solution where they could work at least some of the time closer to home.” He adds: “If you think about that in the context of the UK, the dynamics are not dissimilar. We are seeing people very clearly expressing a demand for the ability to work closer to home. Meanwhile, we have got a high street which… is in something of an existential crisis. So there is plenty of supply, and we have a concept that can match the demand.” It also goes hand in hand with the company’s broader push towards making its office network more regional-focused, announced by founder Mark Dixon along with its annual results in March. “I would describe [retail-to-office] as a logical extension of our regional strategy,” says Sinclair. “It will be an important part of the IWG growth plans going forward.” Will it work? “What we will see in the UK is two types of location,” he continues. “One will be in shopping centres and the other will be in more traditional high street locations.” The nuance between the two is that high street spaces tend to be smaller and less easy to access by car. “But the thing about those traditional high street sites is that more people live nearby, so are able to walk,” says Sinclair. Shopping centre units, meanwhile, are typically similar to malls in the US, with larger units, ample parking and easy access to nearby shops and food outlets. “We can replicate relatively clearly what we have done in the US [in shopping centres], which is great,” he says. As for demand, a desire for a more local workspace from employees is one thing, but what about the employers? IWG’s own polling found that nearly half (49%) of FTSE 250 companies are considering moving offices to areas where their workforce typically lives. “We have seen a step change in demand from corporates that are seeking flexible work solutions for their employees,” Sinclair says. “They see this as an opportunity to reduce their real estate footprint and the costs associated with that.” It all adds up to a product on which IWG bosses are willing to place their bets at a crucial time for the company, which has suffered huge losses during the pandemic. “We know the demand is there, and we are confident in the concept,” says Sinclair. “This is where people want to work, and that is just the reality.” To send feedback, e-mail alex.daniel@egi.co.uk or tweet @alexmdaniel or @estatesgazette Photos © IWG