Workspace Group achieves resilient first-quarter demand

Workspace Group has said solid demand persisted in the first quarter as businesses continue to target flexible office arrangements.

The London-focused real estate investment trust reported rent roll grew by 3.2 per cent on a like-for-like basis to £103.6million for the three months ending June. 

Despite wider uncertainty across the commercial property market, the company concluded 260 new lettings over the period and kept its occupancy rates relatively constant at 89.2 per cent.

Short-term shift Workspace Group’s latest trading update comes as figures showed the length of UK office leases has declined to their lowest ever levels on record

The Covid-induced rise of hybrid working has prompted many firms to downsize their office portfolio and favour more flexible arrangements.

Workspace struggled during the early stages of pandemic-imposed lockdowns but has rebounded well as employees have been encouraged to return to the office.

Graham Clemett, chief executive of Workspace Group, said: ‘We have had a good start to the new financial year highlighting the appeal of our flexible offer, with stable like-for-like occupancy and continued improvement in pricing.

‘Our extensive property portfolio across London provides us with a rich opportunity to upgrade and reposition our buildings to meet both the changing needs of our customers and higher environmental standards.’ 

The company’s latest trading update comes as figures showed the length of UK office leases has declined to their lowest ever levels on record amid a pandemic-induced shift towards working from home.

Average lettings contracts signed in the first three months of this year lasted just two years and ten months, according to the commercial property platform Re-leased.

Since 2019, leasing deals of 12 months or less have risen threefold and now comprise about half of all leases, while long-term lettings lasting for at least a decade have plunged by 70 per cent.

As well as remote work, the commercial real estate sector is being impacted by the Bank of England’s successive interest rate hikes and stricter energy efficiency regulations that require expensive upgrades to office buildings.

In the last financial year, Workspace swung to a £37.5million pre-tax loss due largely to falling property valuations even though its net rental income climbed by around a third to £116.6million.

Workspace Group shares were 3.5 per cent lower at 477.8p on Thursday morning and have fallen by around 43 per cent over the past two years.