Regus defies sceptics to become world leader
Copyright: David Lawson
Published in Property Week October 2009
They should be popping champagne corks at Regus to celebrate 10 years since Mark Dixon proposed launching a £1bn company to revolutionise the property world. Not long ago few would have bet the firm would still be around after flirting with bankruptcy.
Celebrations will have to wait, however. Scepticism about serviced space back in 1999 forced postponement of the listing, as critics said it could not possibly be worth £1bn. Dixon had the last laugh, successfully launching at £1.5bn the following year and watched that quickly soar to more than £2bn. “He’s a determined little bugger,” said one sceptical City analyst when the house came crashing down a couple of years later and Regus had to be rescued. “He’s still convinced he is right and nothing anyone says fazes him.”
Ten years on, the dogged Regus chief executive should be laughing even louder. Deep into the worst recession in memory, the share price has almost doubled in the last year. It continued rising even after a 7% half-year drop in pre-tax profit to £69m and a warning from Dixon that the near future will be tough.
So what has changed in 10 years? Very little at first glance. In fact the basics have remained the same since Property Week was the first to investigate this brash entrepreneur back in 1995. "We'll have failed if we haven't created one of the world's largest businesses," he said. That box has been firmly ticked. Regus now towers over competitors, with 400,000 clients in 75 countries. But Dixon’s ambition has barely dimmed. “After 20 years, we have still barely scratched the surface of matching the way people work,’ he says.
Dixon stumbled on the concept of serviced offices after visiting Brussels in a quest for ideas after making £800,000 from selling a burger bun bakery, his first major venture. He found that top names desperate to be located near EU decision makers would pay big money for short-term space. But Dixon could not raise enthusiasm among investors after bringing the idea to the UK and had to fund expansion himself for the next decade. Ironically, he sparked a rush of copycats among other entrepreneurs both here and in the US.
Regus floated, making Dixon a paper billionaire. Not bad for an Essex boy who left school at 16. Disaster came quickly, however, when demand plummeted after the dotcom crash, forcing Chapter 11 protection in the US and sale of a majority stake in the UK to private equity investor Alchemy. From a float price of 260p, Regus hit a low of 3½p by early 2002, valuing Dixon’s stake at less than £80m. Yet within a year he bought HQ Global, his chief American rival, for £164m. And as recession receded, he bought back control of Regus in the UK.
So what has changed in 10 action-packed years? “Regus is a different firm. At the start it required venture capital and I was the biggest shareholder. We then went through some tough times but now we are a respected global company with no debt and £200m of cash.”
The market has also changed out of recognition because of the internet, broadband, the PDA and laptops. All these influence work patterns. They were rare in 1999 and inconceivable in 1989. “Peugot is now putting 6Gb of connectivity in its cars. I can work from the back of a taxi.”
There has been more innovation in the last two years than the previous 20, including giant teleconferencing screens and “virtual” offices. “Two thirds of Regus customers have no physical space needs,” he says. “This sector is not about property: it is about services.”
TOMORROW - 2019
The next ten years will see changes that put the last decade into the shade, says Dixon. The property market will be fundamentally altered by huge increases in energy and transport costs and demand for better work/life balance. The most popular office locations will be near where people live and around public transport nodes. Regus is already creating business centres in residential areas in the US and Holland and planning a similar rollout in the UK.
Technology will leap forward to further enable working from home, local centres or drop-in offices. Facilities such as telepresence [large screen teleconferencing] are already available but not being widely used, says Dixon. Prices will fall to a level where anyone can work anywhere. “Within five years everyone will have access to working on screen from every desk or laptop,” he says.
Serviced space will never replace conventional property, however. Much is made of the fact that after 20 years it still hovers around only 3% of total stock but Dixon is not concerned. “It is like comparing the percentage of hotel rooms to the stock of housing.”
Major centres will survive, although people may not commute every day. Secondary locations will whither, however, as staff choose to work either from home or local business centres.