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Workspace bets on flexible leases to navigate post-pandemic market

·2-min read
FILE PHOTO: People enter an office building owned by Workspace in London

By Aby Jose Koilparambil

(Reuters) -Workspace, the London-focused office-space provider, on Wednesday said demand for its flexible leases, which give tenants the option to expand or cut space quickly, will be an advantage in the post-pandemic environment.

Office space operators are facing a bumpy road to recovery after battling lower rental levels and steep valuation declines in the wake of the pandemic when clients shifted to remote working or downsized or vacated spaces.

Workspace, which provides unfurnished spaces to customers ranging from architects and florists to craft beer brewers and app developers, mainly has two-year, short-term leases with a possibility for a six-month rolling break.

"The customers have the opportunity to upsize or downsize rapidly, and they don't need to wait two years or even six months," Chief Financial Officer Dave Benson told Reuters.

Workspace reported pretax profit of 3.4 million pounds ($4.57 million) for the six months ended Sept. 30, its first profit since the pandemic. This compared with a loss of 110.4 million pounds a year earlier. It reinstated an interim dividend of 7 pence per share.

A per share measure that reflects the value of its buildings — EPRA net tangible assets — fell 1.1% to 9.28 pounds.

"Workspace is without doubt on the road to recovery, but we believe it will take some time," said Peel Hunt analysts in a note.

However, the rent roll remains almost 25% below its pre-Covid level and the valuer continues to mark down the portfolio, driven by declining market rents, Peel Hunt analysts said.

Workspace shares were down 1.3% as of 1242 GMT.

The FTSE 250 company, which serves mostly small and medium-sized enterprises, has some 3,000 customers and owns 40 million square feet space across 60 buildings in London.

Workspace said return-to-office trends after the lifting of COVID-19 curbs in England had so far concentrated on clients from e-commerce, tech and fashion design industries. The company reported utilisation of its centres at about 55% of pre-pandemic levels.

It also announced the acquisition of smaller rival The Busworks in Islington for 45 million pounds.

($1 = 0.7433 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Milla Nissi and Jane Merriman)

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