London-focused Workspace forecasts strong second-half rental growth

By Aby Jose Koilparambil

(Reuters) -Workspace Group on Tuesday forecast strong rental growth in the second half of the current fiscal year, after the London-focused flexible office-space provider posted a half-year loss as elevated interest rates hit the valuation of its buildings.

Flexible space operators such as Workspace have performed well on the operational front as tenants opt for short-term leases and reassess strategies periodically amid broader economic worries.

“We continue to see good demand and expect further growth in average rent per square feet in the second half of the year,” the company said in a statement.

The London-listed company, which serves mostly small and medium-sized enterprises and entrepreneurs, said it was winning over some UK customers of WeWork after the U.S.-based company filed for bankruptcy earlier this month.

Workspace has a different business model to WeWork and owns their buildings unlike the U.S. firm, but the company’s finance chief Dave Benson said that the WeWork’s restructuring might benefit Workspace.

“The WeWork serviced offices are often a feeder for us,” Benson said. “So there’s probably a little bit more of that (opportunity) now”.

Workspace, which provides unfurnished spaces to a variety of clients, from architects to florists, craft beer brewers and app developers, said a per share measure that reflects the value of its buildings — European Public Real Estate Association net tangible assets — fell to 8.32 pounds ($10.37) as of Sept. 30, a drop of 10.2% from March-end.

Workspace said half-year net rental income grew 9%, while like-for-like occupancy dropped 0.6% year on year to 88.7%.

It reported a pre-tax loss of 147.9 million pounds for the six months ended Sept. 30, compared with a profit of 35.8 million pounds a year earlier.

($1 = 0.8025 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Rashmi Aich and Louise Heavens)