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Office rental firm IWG's shares fall after inflation warning

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FILE PHOTO: A person enters a Spaces office workspace, in London
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By Amna Karimi

(Reuters) -London-listed office rental firm IWG warned it could face higher costs this year due to soaring inflation, overshadowing stronger quarterly revenue and sending its shares down 9% on Tuesday.

IWG, known for its Regus brand of office spaces, is seeing business rebound as people return to offices and workplaces choose hybrid work models, but soaring inflation in Britain and other markets is adding to its expenses.

"We are experiencing higher inflationary pressures across some of our cost categories which will represent a headwind during 2022," IWG said in a statement but did not elaborate.

Shares in the Swiss-headquartered company, which has some 3,500 buildings in over 120 countries and counts most Fortune 500 firms as customers, were down 7.5% at 234.6 pence on the London Stock Exchange by 0845 GMT.

Still, IWG said revenue jumped nearly 18% to 613.7 million pounds ($782 million) in the first quarter ended March 31, led by strong demand for flexible and hybrid workspaces which has pushed overall occupancy closer to pre-pandemic levels.

"We've got a lot of companies moving to a hybrid way of working ... therefore, our business is responding very positively to that change," IWG Chief Executive Mark Dixon told Reuters.

IWG said ongoing coronavirus lockdowns in China were hurting its business and that the return to normal conditions there had been "slower than previously hoped". The company operates around 120 locations across 29 cities in China.

It also plans to review further opportunities around joint ventures and acquisitions after announcing a merger last month of its online marketplace business for office space with flexible workspace platform The Instant Group.

($1 = 0.7844 pounds)

(Reporting by Amna Karimi in Bengaluru; additional reporting by Radhika Anilkumar; Editing by Subhranshu Sahu and David Evans)

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