Workspace Says London Flexible-Office Rents to Stay Subdued

Workspace Group Plc, which provides flexible office space across central and suburban London, said that pressure on rents would remain despite early signals of a recovery in demand for space.

Rents are likely to stay subdued in the coming months as the firm seeks to boost occupancy levels, which slumped 12% in the year through March to 82%, it said in its full-year earnings statement on Thursday. Vacancies stabilized in the fourth quarter, while leasings and enquiries are back to pre-Covid levels as the easing of restrictions encourages more businesses, it said.

Workspace shares fell as much as 3.6% in London trading on Thursday morning.

“We have seen first-hand the impact of Covid-19 on many of our customers,” Chief Executive Officer Graham Clemett said in the statement. Still, “we are seeing encouraging signs of recovery in customer demand and we have a lot to be optimistic about in the next year and beyond.”

Workers in the U.K. are slowly returning to the country’s offices, with occupancy still less than half of pre-Covid levels, according to software firm Metrikus. That’s expected to rise amid as the economy gradually reopens after months of lockdown, with the country recording no new pandemic deaths this week for the first time since the start of the outbreak.

While lettings and enquiries are recovering for Workspace, the use of business centers at the end of May was still around a third of pre-Covid levels. The firm hopes to see those figures recover by September, Clemett said in an interview. Until that happens, tenants will still be able to push for discounts.

“We will take that hit with pricing and probably run with it for a period of time,” Clemett said.

Workspace portfolio values sank 10% to 2.3 billion pounds ($3.3 billion) in the year through March. That saw the company swing to a 235.7 million-pound loss before tax. Still, the revival in activity has given the firm confidence to pay a final dividend after earlier deferring the decision.

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