(Bloomberg) -- IWG Plc, the serviced-office company that operates the Regus brand, has hired an adviser to sell its Spaces unit in an attempt to lure a buyer that wants to take on WeWork Cos., people with knowledge of the plan said.
The Switzerland-based company brought in broker Eastdil Secured LLC to market the unit that runs so-called design led flexible offices, the people said, asking not to be identified as the plan is private. IWG is pitching Spaces to potential buyers as an opportunity to acquire a global competitor to the richly valued WeWork, which is expanding rapidly, the people said.
Representatives for Eastdil and IWG declined to comment.
The move comes after a series of abortive bids for all of IWG in 2018 that led to a review of whether Spaces -– which specializes in providing more modern flexible and co-working office space than the Regus brand -- would be valued more highly as a separate business. If the review concluded that Spaces would be worth more outside IWG, then “we will consider what we do with it,” IWG Chief Executive Officer Mark Dixon told analysts in November.
IWG has a market value of about 2 billion pounds ($2.6 billion) compared with WeWork’s $47 billion valuation after the latest injection of capital from Japan’s Softbank Group Corp., despite the fact the New York-based company continues to post losses. The valuation of WeWork at technology-company levels has spurred interest from other major investors such as Blackstone Group LP, which bought a majority stake in U.K. operator The Office Group with plans to expand it internationally.
Spaces has about 180 locations in approximately 50 countries and plans to double to more than 400 sites this year, making it the only global rival to WeWork, the people said. It typically operates much larger offices than a standard Regus location and places more emphasis on modern architecture and design.
While both Spaces and WeWork have been expanding rapidly, the industry remains dominated by smaller operators as hundreds of investors rush to cash in on the rapid growth in the nascent co-working sector. In London, the world’s leading city for flexible offices, the three largest providers including WeWork and IWG still account for only 17 percent of the total 1,300 locations in operation, according to a report in June by broker Instant Offices.
The rapid growth of the sector in London -- about 9 percent in 2018 -- is likely to lead to consolidation among operators this year as competition for tenants increases and smaller operators struggle to access capital to fuel expansion, Savills Plc head of commercial research Mat Oakley said.
Started in Amsterdam in 2008, Spaces was acquired by IWG in 2014. The brand has a mixture of leases, management agreements and buildings that it owns.
About half of Spaces’ tenants are big businesses including Microsoft Corp., ABN Amro Group NV, Uber Technologies Inc., Amazon.com Inc. and Unilever NV, Spaces Chief Executive Officer Martijn Roordink said in an interview with Bloomberg in November. The rest of the brand’s offices are occupied by small and medium-sized companies, start-ups and freelancers, he said.
“WeWork is very into glass and smaller elements of density. We don’t do that,” Roordink said. “We don’t believe in dominant design, we believe in northern European design.”
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