Workspace reports solid demand despite rent roll dip

Workspace Group reported solid demand for its flexible office space in its second quarter on Tuesday, completing 296 new lettings with a total rental value of £7.4m, although like-for-like occupancy dipped 0.7% to 87.5% as a higher-than-usual number of larger customers vacated premises.

The FTSE 250 company said despite that, pricing momentum remained positive, with like-for-like rent per square foot increasing 1.6% during the quarter, bringing the figure to £47.00.

Total rent roll for the first half of the year decreased 2.3%, or £3.3m, to £140.1m, reflecting the impact of customer vacating activity.

The firm said it had made significant progress in its strategy to dispose of non-core assets, completing £29.9m in disposals during the first half and exchanging a further £26.9m, expected to complete in the second half.

Workspace said it continued to enhance its portfolio, with the recent completion of the refurbishment and extension of Leroy House in Islington, delivering 58,000 square feet of new space across 101 units.

The building, designed to be Workspace's first net-zero property, had reportedly attracted strong interest, with 11 units already let or under offer within the first two weeks of marketing.

Workspace said it remained in a stable financial position, with £144m in cash and undrawn facilities as of 30 September.

Proforma loan-to-value stood at 35%, based on the 31 March valuation.

“We have seen good customer demand in what is typically a quieter quarter for lettings over the summer,” said chief executive officer Graham Clemett.

“Our strong track record of consistently driving pricing growth continued in the quarter, demonstrating the appeal of our offer to businesses looking for high quality, well connected and sustainable work space.

“We saw a drop in like-for-like occupancy due to an unusually high number of customer vacations in the quarter, including a number of larger customers who have grown with us over many years.”

Clemett said that while the churn was higher than usual, it was part of the “regular rhythm” of the business.

“Many of the larger units will be subdivided into smaller units, where we see stronger demand and achieve higher pricing.

“We are encouraged by the improving leasing activity we have seen in September.”

Graham Clemett added that the company was continuing to recycle capital from disposals into its project pipeline, and recently completed the refurbishment of Leroy House in Islington.

“This ongoing activity, coupled with the strong demand we see from London's SMEs, gives us confidence in the exciting growth opportunities ahead for Workspace.”

Workspace said it would report its half-year results on 22 November.

At 0840 BST, shares in Workspace Group were flat at 620p.

Reporting by Josh White for Sharecast.com.