Regus snaps up rival Basepoint

Serviced office giant Regus has swooped to buy Basepoint Business Centres as it looks to consolidate its position as the biggest player in the burgeoning sector amid fierce competition from new entrants.

Under the deal, which is thought to have been struck at a price of up to £100m, Regus will acquire 31 Basepoint centres, totalling around 1m sq ft in space, and increase its portfolio to more than 340 centres - more than three times the number operated by any other provider. The acquisition marks Regus’s latest attempt to increase its dominance in the serviced office market, having bought Avanta last year and having previously acquired BusinesSuites and MWB. The deal will bolster its balance sheet as all the Basepoint centres are freehold and fits with its long-term strategy to increase the proportion of freehold assets in its portfolio relative to leasehold. Most of the Basepoint centres are located in the South East, with the most profitable centres being a mix of offices and light industrial. Regus has had to adapt its model in recent years to compete in the rapidly evolving sector.

Accelerated expansion programme

The emergence of WeWork and other co-working and flexible workspace providers has forced Regus to diversify its offer with co-working and virtual office services. The company has also accelerated its expansion programme in the UK in recent months, opening new centres in Aylesbury, Birmingham, Lewisham and Teddington. Earlier this month, Regus, whose holding company IWG is listed in London, revealed a 4% dip in pre-tax profits in the first half of the year to £80.8m, which it put down to increased investment to grow its network. Industry experts said they expected further M&A activity in the sector over the next few months.  “Notwithstanding the Brexit door is now open, there are clear signs that the consolidation in the sector will continue - especially in the core markets, including London - and do not be surprised to see a few new players in the market, including landlords offering quasi-flexible/managed space,” said Douglas Green, co-founder of GKRE, a specialist flexible workspace agency. Smaller independent operators could be sold to larger rivals or investors and some of the bigger operators could even be taken over, he said, citing Blackstone’s acquisition of The Office Group earlier this year. One outfit currently up for sale is the upmarket operator London Executive Offices (LEO), which is being marketed through Citibank and HSBC by owner Queensgate Investments with a price tag of £700m.