: COVID-19 problems haven’t left the building. World’s biggest office-workspace group warns on profits.

Shares in IWG plunged more than 15% on Monday, after the world’s largest flexible-office company warned that underlying earnings in 2021 will be “well below” the previous year’s levels, as COVID-19 lockdowns and the emergence of new variants of the virus that causes the disease continued to hit its operations.

But the FTSE-250-listed owner of the Regus brand said it expected a “strong recovery” in 2022, citing unprecedented demand for flexible work products as companies adopt hybrid working.

Read: WeWork loses $2.1 billion in a quarter

IWG said it had seen “positive momentum” in some markets, such as the U.S., where COVID-19 pandemic restrictions were being relaxed, and that inquiries had reached pre-pandemic levels. But the company said that overall improvement in office occupancy has been lower than expected, and as a result, it expects underlying group earnings before interest, tax, and amortization to be well below the £133.8 million ($189.19 million) it reported in the previous year.

Shares in IWG

dropped 15.85% in early morning London trading on Monday. The stock has fallen 10.11% so far this year, according to FactSet.

Read: Goldman Sachs CEO: Working from home is an ‘aberration’

Flexible-office providers such as IWG have been hit hard by the pandemic, which has dramatically accelerated the shift to remote working. Last week, rival Workspace Group

said that a recovery to pre-pandemic levels will take a couple of years. Both companies offer shorter, more flexible lease terms to customers than traditional office providers, leaving them vulnerable as companies have pared back office space over the past year.

RBC Capital analysts said the working-from-home trend is likely to be a continuing feature, and there is a risk that many previous customers won’t require IWG’s services at all going forward, whilst there is a risk of oversupply of office space in many major cities, for example London.

“Whilst there is scope for a material rebound in occupancy off a much lower cost base post all the network rationalization, ultimately, the group needs to deliver on material master-franchising deals to demonstrate upside value in the group, reducing capital employed and justifying a higher long-term multiple,” said the analysts in a research note to clients on Monday.

IWG, which recently signed deals with companies including Japanese telecoms group NTT

and U.K. bank Standard Chartered

for hybrid working services, said it was making good progress on larger, master-franchise agreements, with several in the final stages of discussions.

Although some companies — such as customer relationship management platform Salesforce

and music streaming platform Spotify

— have announced that their staff members would be allowed to work from home permanently in the future, others, such as Goldman Sachs

and JPMorgan

have started to call their workers back to the office, citing lost collaboration and an inability to train junior staff members, as they have remained home for more than a year.

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