Workspace reports rise in rents, softer occupancy in Q3
By Josh White
Date: Thursday 23 Jan 2025
(Sharecast News) - Workspace Group reported a 1.1% increase in like-for-like rent per square foot to £47.54 for its third quarter on Thursday, reflecting continued pricing momentum despite softer occupancy levels.
The FTSE 250 company said like-for-like occupancy fell 1.3% during the three months ended 31 December to 86.1%, with like-for-like rent roll declining 0.6% to £106.8m.
It said it completed 273 new lettings in the quarter, generating a total rental value of £6m, slightly down from the previous year.
Customer demand remained robust, with 531 enquiries and 337 viewings recorded in the first half of January, marking the strongest week for viewings since before the Covid pandemic.
Total rent roll declined 1.3% to £138.3m, driven by a £0.7m reduction in the like-for-like portfolio, along with further decreases from projects underway and non-core asset disposals.
However, completed projects contributed a modest increase of £0.2 million.
Workspace said it continued its capital recycling strategy, exchanging contracts for the disposal of two non-core assets during the quarter.
The sale of Rainbow Industrial Estate in Raynes Park for £20.3m and an office building in Soho for £13.9m was set to deliver £34.2m in proceeds at a net initial yield of 5.0%, with completion expected in the fourth quarter.
Workspace added that it made progress on its development pipeline, completing the refurbishment and extension of Leroy House in Islington, its first net zero carbon building, adding 57,000 square feet of new space across 101 units.
Refurbishment projects at the Chocolate Factory in Wood Green and The Biscuit Factory in Bermondsey remained on track, with practical completion expected in late spring and late 2025, respectively.
In Camden, work had started at the Centro Buildings to convert Atelier House into a Workspace business centre.
Workspace said it also strengthened its financial position, extending the maturity of its £135m revolving credit facility to 2028, with options to extend further and increase the facility subject to lender approval.
The company also secured an £80m term loan facility, maturing in November 2026, with potential extensions available.
Net debt decreased by £9m in the quarter to £847m, while cash and undrawn facilities stood at £233m.
The loan-to-value ratio remained at 35%, based on the 30 September valuation.
"The macroeconomic environment continued to weigh on customer activity in the third quarter," said chief executive officer Lawrence Hutchings.
"Within that environment, we are laser focused on optimising what we can control. We are making good progress with the refurbishment and subdivision of larger spaces which have become available this year, building on the work already underway across the portfolio to meet the demand from our customers.
"Recycling larger spaces back into smaller units, which are our core product and achieve higher pricing growth, is an integral part of our business model."
Hutchings said the company's balance sheet remained "robust", and its capital recycling programme was continuing at pace.
"We agreed £34.2m of disposals in the quarter which we expect to complete by year-end.
"The proceeds are being recycled into our accretive project pipeline, which further underpins our optimism for the future of Workspace."
At 1110 GMT, shares in Workspace were down 1.89% at 441.5p.
Reporting by Josh White for Sharecast.com.
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