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AgilQuest
spoke recently to Mark Dixon, CEO of the Dallas,
Texas-based Regus Group Network, the world’s
largest and most flexible network of office space,
executive suites and meeting rooms serving the
small-office market. The company operates 750
business centers across 350 cities in 60 countries
-- including 14
in Northern Virginia.
AgilQuest: You founded Regus in 1989 – in
Brussels. Where did the idea for super-flexible
office space come from?
Dixon: I was starting another business at the
time. The European Union was coming in, and lots of
workers needed accommodations downtown. I was
rebuilding and refurbishing apartments for them. I
found it very complicated to get office space
myself. The whole notion of finding space, fitting
it out and putting in the basic technology was a
very time-consuming affair. If you wanted an office
for just a few people, it was extraordinarily
complicated.
From there, it was just a matter of building a
better mousetrap. The idea was very simple. You put
everything together – the space, the furnishings,
the telecommunications -- and package it. The
original business plan called for one center in each
of the 12 capital cities of the Common Market. Regus
has always been based on the idea of having an
international network.
Regus serves a number of niches: branch offices,
project offices, team rooms, cubicles, hot desks.
What’s driving the trend from long-term leases and
giant office complexes to small, hyper-flexible
space?
First is the drive towards outsourcing. By
outsourcing, I don’t mean moving jobs to India.
Some of the things that were core corporate
functions are now deemed non-core. Start-ups now
outsource almost everything. Large companies are
driven to be more nimble than ever before, and they
outsource to small companies. Look at Nike – they
outsource the design of their shoes. They don’t
manufacture or transport them. Effectively, what you
have with Nike is a company that comes up with ideas
and owns the brands and provides the financing for
the whole thing to work.
The big facilitator is technology. You can tie all
these subcontractors and suppliers together like you
couldn’t before. People can collaborate like they
couldn’t before.
Regus caters to small companies and big companies
with branch offices. Say you want to put five people
in Tucson and seven in the west end of London. We
provide that at a price that make sense, with some
flexibility. Why do it yourself? Outsource it. The
difference now is awareness. Seventeen years ago,
companies thought they had to do everything
themselves. Now they don’t.
So, outsourcing is the first trend. What’s the
second one?
Small company creation. Largely as a result of
outsourcing, you’re seeing unprecedented small
business creation. And not just in the United
States. The French and the Germans understand they
can’t keep their economies going by subsidizing
the old industrial giants.
There’s one more thing: demographics. There are
fewer prime-age workers. In 2008, there will be a
reduction of four percentage points – and that’s
in the U.S. where the birth rate is in balance. In
Germany and Italy and Japan, you have a dramatic
decrease in prime-age workers. What does that mean?
If you’re graduating from college in 2010, you
have a lot more choices. Companies are going to need
to offer something different. We’re already seeing
today that companies are offering employees the
ability to work from home and the ability to work
from a local office.
Previously, companies were doing this to save money.
Now, it’s a benefit to the individual. People are
looking for work-life balance. People don’t like
commuting for two hours. Leading companies aren’t
waiting until they have a problem recruiting.
They’re putting these strategies into place today.
People who rent small offices need to connect
with the home office. So, Regus provides IT support
as well. How important is that to your business
model?
It’s very important. We set up a wide-area Virtual
Private Network. When our customers go to any Regus
center, it’s as if they were going to their own
corporate offices. We don’t see ourselves at all
as a real estate company. We’re a services
company. We measure ourselves not by how we do real
estate but how much more productive we make our
customers. It’s not the space, it’s what you do
in it.
About 200,000 people use our services every day.
We’ve combined all that buying power in a
buyer’s group. We’ve cut deals with T-Mobile,
IBM and others. We also encourage networking, a
business exchange where people swap ideas and
business cards. It’s a very social atmosphere. We
get people together for breakfast, cocktails, and
bring in speakers.
How closely do you work with your customers? Do
they just pick up the phone when they need some
space, or do they regard you as a strategic partner?
For larger accounts, we have account teams that help
manage their portfolios. We get the portfolio,
analyze it, break it down, show where we can save
money or provide more flexibility. If two companies
merge, there’s a chance for them to get rid of
lots of their fixed real estate. They tell us, “I
really want to save some money. I want to cut head
count. I want to get this off my balance sheet.”
We’ve tripled the size of those teams over two
years.
How do you see these trends shaping the demand
for real estate?
There’s still going to be demand for office space.
It just has to be more convenient. I live in Dallas.
You’ve got people who are driving from one end of
the city to the other to get to work. In the future
a lot of them won’t have to do that anymore. I
think you’ll see a lot more local business centers
where people working out of home can get some
printing done, hold meetings, network. There will be
days when they need to get out!
I don’t know how long it’s going to take, but in
five to 10 years, there’s going to be a completely
new fabric. The tipping point is getting close and
closer.
Note:
This feature was published originally in the Spring
2006 edition of AgilQuest Corporation's corporate
newsletter, "Network
of Space."
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January 8, 2007
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