REG - Workspace Grp PLC - FOURTH QUARTER BUSINESS UPDATE

WorkspaceAnnouncement

17/04/2025 07:00

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RNS Number : 3649F  Workspace Group PLC  17 April 2025

17 April 2025

Workspace GROUP PLC

 

FOURTH Quarter business update FOR THE

PERIOD ENDING 31 MARCH 2025

 

Workspace Group PLC ("Workspace"), London's leading owner and operator of
sustainable, flexible work space, provides a business update for the fourth
quarter ending 31 March 2025.

 

Lawrence Hutchings, Chief Executive Officer, Workspace Group PLC, commented:

 

"We have delivered a strong lettings performance in Q4, resulting in
like-for-like rent roll growth, partly driven by strategic actions we've taken
to counter current macroeconomic and competitive pressures, support retention
and improve conversion. These actions will help make Workspace a more agile,
efficient business and drive occupancy back up to sustainably higher levels. I
look forward to providing more detail on this, and our wider short- and
medium-term plans, as part of a strategy update that will be presented
alongside our full year results in June.

 

Looking ahead to our new financial year, recent macroeconomic events combined
with slower economic growth will continue to affect sentiment among some of
our customers. Whilst it will take some time for us to work through the impact
of the larger unit vacations we have seen, and expect to see in the first half
of this year, we remain laser focused on what we can control, including costs,
as we continue to prioritise a recovery in occupancy and rent roll.

 

Workspace's truly flexible offer was built from the ground up specifically for
London's SMEs. Confidence in the long-term outlook for this market underpins
my excitement in the structural growth opportunity that lies ahead of us,
which I believe Workspace is uniquely positioned to capture."

 

Highlights

 

·    390 new lettings completed in the quarter, with a total rental value
of £10.1m

·    Like-for-like rent per sq. ft. up 0.9% in the fourth quarter to
£48.08

·    Like-for-like occupancy down 1.0% in the fourth quarter to 85.1%

·    Like-for-like rent roll up 1.4% to £107.9m

·    Continued progress on capital recycling from the disposal of non-core
assets, having completed or exchanged on the sale of six properties for a
total of £52.5m in the fourth quarter, with a further disposal completed in
April for £10.3m

·    Robust balance sheet with £260m of cash and undrawn facilities and
proforma LTV of 34% (based on 30 September 2024 valuation)

 

Customer activity

Lettings activity was strong in the fourth quarter, with 390 new lettings
completed with a total rental value of £10.1m, c.15% ahead of the final
quarter of the previous financial year and a significant improvement on Q3.
This was driven by actions taken to support retention and improve conversion,
as well as enhanced marketing efforts.

 

              Monthly Average               Monthly Activity
              Q4        Q3        Q4        31 Mar  28 Feb  31 Jan

              2024/25   2024/25   2023/24   2025    2025    2025
 Enquiries    796       628       818       777     694     916
 Viewings     585       457       589       600     509     646
 Lettings     130       91        114       175     121     94

 

Customer demand in the first quarter is expected to be seasonally quieter,
impacted by the timing of bank holidays.

 

We have continued to see larger customers vacating in the quarter and
occupancy has also been impacted as the recent completion of large-unit
refurbishments, which are now available to let, has increased the total
available floor area. This has resulted in a reduction in like-for-like
occupancy of 1.0% in the quarter to 85.1%.

 

As we said in our Q3 update, we continue to selectively review unit pricing
where appropriate, among other initiatives to support retention and attract
new customers. Demand from small businesses for our core product has driven
continued overall improvement in average pricing, with like-for-like rent per
sq. ft. up 0.9% in the quarter to £48.08.

 

                                        Quarter Ended
                                        31 Mar 25  31 Dec 24(1)  30 Sep 24(1)  30 Jun 24(1)
 Like-for-like occupancy                85.1%      86.1%         87.4%         88.2%
 Like-for-like occupancy change(2)      (1.0)%     (1.3)%        (0.8)%        0.0%

 Like-for-like rent per sq. ft.         £48.08     £47.65        £47.12        £46.40
 Like-for-like rent per sq. ft. change  0.9%       1.1%          1.6%          1.2%

 Like-for-like rent roll                £107.9m    £106.4m       £107.1m       £110.1m
 Like-for-like rent roll change         1.4%       (0.7)%        (2.7)%        1.2%

 

(1) Restated for the transfer in of Old Dairy, Shoreditch where occupancy is
now stabilised post refurbishment, the transfer out of Archer Street Studios,
Soho, and Rainbow Industrial Estate (part), Raynes Park, which have been sold,
the transfer out of Shaftesbury Centre, Ladbroke Grove to non-core which has
been exchanged for sale and the transfer out of The Biscuit Factory site in
Bermondsey which is undergoing major refurbishment.

(2) Absolute change

 

 

Additional detail on like-for-like occupancy

 

As part of our broader strategy, to be detailed in June, we have reevaluated
our methodology for calculating like-for-like occupancy. This is especially
important as we expect that we will have more large units coming back to us in
the next six months, which will require refurbishment or subdivision. The
macroeconomic backdrop has led us to take an increasingly stringent view on
capital expenditure which has meant that some planned schemes may be deferred
or amended in favour of letting space in its current state.

 

We previously adjusted the like-for-like floor space total for refurbishment
projects that were planned but where capex was not yet approved. Going
forward, we will only exclude floor space from the occupancy calculation once
capex has been approved on a refurbishment project and the project is either
underway or will be implemented imminently.

 

We have provided a reconciliation of total floor area to available floor area
in the table below, along with the revised like-for-like occupancy, and as
previously reported.

 

Of the 67,000 sq. ft. of planned refurbishments that have not yet been
approved, detailed in the table below, we have budgeted capex for c.50,000 sq.
ft. of these projects in the current financial year.

 

 

 Like-for-like portfolio                                Quarter Ended
                                                        31 Mar 25  31 Dec 24  30 Sep 24  30 Jun 24

 Occupied floor space (sq. ft.)                         2,244,858  2,233,723  2,272,497  2,372,807
 Total floor space (sq. ft.)                            2,733,734  2,733,898  2,729,923  2,733,430
 Approved refurbishments (sq. ft.)                      27,693     41,005     30,864     23,468
 Available floor space (sq. ft.)                        2,706,041  2,692,893  2,699,059  2,709,962
 Occupancy (revised)                                    83.0%      82.9%      84.2%      87.6%

 Planned unapproved refurbishments (sq. ft.)            67,218     98,501     97,787     20,129
 Available floor space (sq. ft.) (previously reported)  2,638,823  2,594,392  2,601,272  2,689,833
 Occupancy (previously reported)                        85.1%      86.1%      87.4%      88.2%

 

Like-for-like rent roll and like-for-like rent per sq. ft. remain unchanged.

 

 

Total rent roll

 

Total rent roll increased by 0.8% (£1.1m) since December 2024 to £139.4m, as
detailed below:

 

 Total Rent Roll                       £m
 At 31 December 2024                   138.3
 Like-for-like portfolio               1.5
 Completed projects                    0.5
 Projects underway and design stage    0.9
 South East portfolio                  0.2
 Disposals                             (2.0)
 At 31 March 2025                      139.4

 

 

Portfolio activity

 

We have continued to dispose of non-core assets and completed or exchanged on
the sale of six properties for a total of £52.5m in the quarter, at a
combined net initial yield of 4% and broadly in line with book value.

 

In January 2025, we completed on the sale of 20-30 Greyfriars Road, Reading,
for £4.0m and in February 2025, we completed on the sale of Parma House, Wood
Green, for £4.9m. In March 2025, we exchanged on the sale of The Shaftesbury
Centre in Ladbroke Grove for £4.5m and completed on the sales of Rainbow
Industrial Estate in Raynes Park for £20.3m, Archer Street Studios in Soho
for £13.9m and the former Mecca Bingo site on Garratt Lane, Wandsworth, for
£5.0m.

 

Following the quarter end, in April, we exchanged and completed on the sale of
Q West in Brentford for £10.3m.

 

Activity is ongoing at our major refurbishment projects; Chocolate Factory in
Wood Green, where we are delivering 40,000 sq. ft. of new and upgraded space
and expect practical completion in the second quarter, and The Biscuit Factory
in Bermondsey, which will deliver 30,000 sq. ft. of additional space towards
the end of 2025. We have also started on site at The Centro Buildings in
Camden, where we are transforming a traditional office building, Atelier
House, into a Workspace business centre with 40 units, a café and meeting
rooms.

 

We have continued to make progress with our ongoing programme of refurbishment
and subdivision of larger units, with c.30,000 sq. ft. completed in the
quarter and marketing commencing shortly on a further c.20,000 sq. ft. largely
completed in the quarter.

 

Financing

 

With long-term interest rates expected to remain high and some debt maturing
this year, we maintain a disciplined approach to gearing. Following the
disposals made during the quarter, net debt decreased by £27m to £820m (31
December 2024: £847m). Cash and undrawn facilities were £260m as at 31 March
2025, with the proforma LTV at 34% based on the 30 September 2024 valuation.

 

Full year results

 

Workspace will publish its full year results for the year ended 31 March 2025
on 5 June 2025, alongside an update on strategy.

 

A presentation to analysts and investors will be held at 9:00am at our
Eventspace, Salisbury House, 114 London Wall, EC2M 5QA.

 

- ENDS -

 

For further information, please contact:

 

 Workspace Group PLC                                             020 7138 3300
 Paul Hewlett, Director of Strategy & Corporate Development
 Clare Marland, Head of Corporate Communications

 FGS Global                                                      020 7251 3801
 Chris Ryall
 Guy Lamming
 Emma Black

 

Notes to Editors

 

About Workspace Group PLC:

 

Workspace is London's leading owner and operator of flexible workspace,
currently managing 4.2 million sq. ft. of sustainable space at 66 locations in
London and the South East.

 

We are home to some 4,000 of London's fastest growing and established brands
from a diverse range of sectors. Our purpose, to give businesses the freedom
to grow, is based on the belief that in the right space, teams can achieve
more. That in environments they tailor themselves, free from constraint and
compromise, teams are best able to collaborate, build their culture and
realise their potential.

 

We have a unique combination of a highly effective and scalable operating
platform, a portfolio of distinctive properties, and an ownership model that
allows us to offer true flexibility. We provide customers with blank canvas
space to create a home for their business, alongside leases that give them the
freedom to easily scale up and down within our well-connected, extensive
portfolio.

 

We are inherently sustainable - we invest across the capital, breathing new
life into old buildings and creating hubs of economic activity that help
flatten London's working map. We work closely with our local communities to
ensure we make a positive and lasting environmental and social impact,
creating value over the long term.

 

Workspace was established in 1987, has been listed on the London Stock
Exchange since 1993, is a FTSE 250 listed Real Estate Investment Trust (REIT)
and a member of the European Public Real Estate Association (EPRA).

 

Workspace® is a registered trademark of Workspace Group PLC, London, UK.

LEI: 2138003GUZRFIN3UT430

For more information on Workspace, visit www.workspace.co.uk
(http://www.workspace.co.uk)

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