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Demand for flexible office space back to pre-COVID levels – Workspace

Workspace Group said that demand for its flexible office space in London was back to pre-COVID levels in full year results.

The group completed 1,520 lettings in the year with a total rental value of £30m, which saw occupancy increase to 89.6%. The group’s rent roll was up 8.7% to £92.9m, with rent per square foot across the portfolio up 0.4% to £36.39.

Net rental income increased 6.4% to £86.7m, helping the group post a trading profit after interest of £46.9m (up 21%).

EPRA net tangible assets (NTA) was up 5.3% to £9.88 per share, thanks to a 3.0% uplift in the value of its portfolio to just over £2.4bn. Including the portfolio valuation gain, profit before tax was £124m.

Reflecting the strong financial performance, the group’s total dividend was up 21% to 21.5p per share (2021: 17.75p). The group’s loan to value ratio was stable at 23% (2021: 24%).

Portfolio activity

Portfolio activity was defined by active capital recycling, with two buildings sold – 13-17 Fitzroy Street, Fitzrovia, and Highway Business Park, Limehouse – for a total of £116m and two buildings acquired – The Old Dairy, Shoreditch, and Busworks, Islington – for a total of £88m.

The group said it has a pipeline of refurbishment and redevelopment activity that is projected to deliver 1.2m square foot of new and upgraded space over next five years.

Post year-end, the company completed the acquisition of McKay Securities PLC for £258m in May 2022.

Commenting on the results, Graham Clemett, chief executive, said: “Our focus over the past year has been to support our customers’ return to the office, rebuild like-for-like occupancy back to 90% and drive trading profit growth. I am delighted that we have been able to deliver on these targets, reflecting the fantastic efforts of the Workspace team, the quality of space and facilities we provide and the attractions of our distinctive flexible offer.

“Customers want their office space to be as flexible as their working habits, without compromising on quality, identity and culture, location or sustainability. Our Workspace offer is resonating because of our deep understanding of the flexible market and what our customers want. This gives us a unique advantage in the market and underpins our confidence in our growth ambitions.

“Our recent acquisitions and project activity give us the opportunity to grow and spread our footprint more broadly, exploiting the scalability of our operating platform. The attractively priced acquisition of McKay will allow us to accelerate our growth in London and provides the opportunity to extend our reach into the South-East. We continue to be disciplined in our investment activity, recycling assets that don’t meet our demanding return requirements.

“Looking ahead, the positive momentum of our recovering occupancy, strong customer demand and improving pricing are tempered, near-term, by wider concerns around the economy. We have not yet seen any impact on customer activity, but we are monitoring this closely. We benefit from the diversity of our customers and the proven agility of SMEs to adapt quickly to changing economic environments. We remain confident that we are well positioned for continued sustainable growth and to deliver strong returns over the medium term.”

WKP : Demand for flexible office space back to pre-COVID levels – Workspace

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