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New Straits Times

UK's Workspace Group expects subdued rental demand for larger office spaces to persist

KUALA LUMPUR: Workspace Group expects challenges with renting out its bigger office spaces to persist in the current fiscal year, the UK-focussed company said on Thursday, after it reported a drop in occupancy due to vacancies at larger units. The company, which leases out space to small businesses ranging from fintech firms to podcasters and people using AI to write music, said like-for-like occupancy was at 83 per cent in the fiscal year ended March 31, compared with 88 per cent a year earlier. WHY IT'S IMPORTANT Workspace, like other commercial properly landlords, has seen property valuations decline since the pandemic, as businesses ditched larger office spaces and opted for hybrid work models. High borrowing costs have also hurt landlords and small businesses. CONTEXT Under new CEO Lawrence Hutchings, the London-listed firm is focusing on boosting rental yields by converting larger spaces into smaller units, lowering debt through asset sales and cutting costs. KEY QUOTES "Our number one priority in the near-term is to recover the occupancy we have lost," Hutchings said in a statement on Thursday. "Last year we saw quite a significant reduction in the property valuation … largely driven by the fact that interest rates went up very significantly," finance chief Dave Benson told Reuters. BY THE NUMBERS Workspace said its estimated rental value (ERV) for rental spaces under 1,000 square feet rose 3.4 per cent in the fiscal year, while that of larger units fell 0.8 per cent. The company reported a pretax profit of 5.4 million pounds (US$7.33 million) in the fiscal year, compared with a loss of 192 million pounds a year earlier, thanks to tighter cost control. EPRA net tangible assets — an industry measure that represents the value of its buildings — fell 3.3 per cent to 7.74 pounds per share in the period.