Interview with Mark Dixon Chief Executive Officer Regus Group

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.

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.