Workspace Group Faces Occupancy Headwinds Despite Strategic Progress

Workspace Group (LON:WKP), a provider of flexible workspace, released its second-quarter business update, revealing a decline in like-for-like occupancy despite ongoing strategic initiatives.

The report highlights both challenges and progress as the company navigates a dynamic market.

Headline Numbers:

• Like-for-like occupancy: Down 2.3% to 80.0%
• Like-for-like rent per sq. ft.: Up 0.1% to £47.55
• Like-for-like rent roll: Down 3.2% to £107.1m

The decline in occupancy, a key metric for Workspace Group, was primarily attributed to the vacation of large spaces at The Centro Buildings in Camden. Excluding these departures, like-for-like occupancy would have been 81.7%. This highlights the significant impact of single-tenant departures on overall performance.

Despite the occupancy dip, Workspace Group completed 326 new lettings in the quarter, generating £7.3m in annual rental value. This demonstrates sustained demand for flexible workspace, with a 2% improvement in conversion of enquiries to lettings, reaching 16%.

The company's efforts to enhance customer retention and improve the letting process are beginning to yield positive results.

Workspace Group is actively pursuing a strategy centered on “Fix, Accelerate, and Scale.” As part of the “Fix” element, the company has streamlined support functions, achieving £2m in annualised efficiencies. This cost-saving measure aims to create a leaner and more efficient organization.

The “Accelerate” phase involves optimizing the portfolio through strategic asset disposals. Workspace Group has exchanged or completed sales of £52.4m of non-core assets, against a £200m target.

These disposals were executed at 1.6% below the March 2025 book value, with a combined net initial yield of 3.5%. The company is building momentum on further disposals identified through a comprehensive portfolio review.

The “Scale” component focuses on innovating to deliver accretive growth. Workspace Group is advancing plans to offer specialized solutions to fast-growing industries in high-conviction locations, expanding its addressable market.

Driver Breakdown:

• Customer Retention: Improved retention strategies and faster product improvements based on customer feedback.
• Operational Efficiencies: Streamlining central costs to deliver £2m in annual savings.
• Asset Disposals: Progress on disposing of non-core assets to optimize the portfolio.

CEO Lawrence Hutchings commented, “In an uncertain environment, we don't underestimate the work we have to do to deliver on our strategy and it will take time, but we are executing at pace and are confident we have the foundations in place to deliver shareholder value.”

Workspace Group maintains a robust balance sheet with £167m in cash and undrawn facilities. The proforma loan-to-value (LTV) ratio stands at 35%, based on the 31 March 2025 valuation, providing financial flexibility.

Total rent roll decreased by 3.9% (£5.4m) in the first half to £134.0m, affected by like-for-like portfolio changes, completed projects, disposals and other adjustments.

The company will publish its half-year results on 19 November 2025.