Workspace: Lettings strong but occupancy declines with clients vacating

Leading provider of flexible office spaces Workspace reported strong lettings in the latest quarter, but saw some of its bigger clients quit as occupancy declined.

The firm said it completed 296 lettings in the second quarter of 2024, generating £7.4m in annual rental income. The London-based firm’s like-for-like occupancy rate however dipped by 0.7 per cent to 87.5 per cent.

This reflects a challenging market environment due to increased tenant vacancies.

While its new lettings suggest a positive ongoing demand for flexible offices, the overall rental roll dipped by 1.4 per cent for the second quarter, due to a higher-than-usual exit of big clients.

This resulted in a £109m like-for-rent roll despite a plateauing pricing momentum, with rent per square foot up 1.6 per cent in the second quarter, reaching up to £47.

The firm made headway on its asset disposals, completing just shy of £30m in sales in the first quarter, with an added £26.9m in disposals set to close by the end of the year.

Workspace also reported £144m in cash and un-drawn facilities, as well as a proforma loan to value ratio of 35 per cent.

This comes amid a broader commercial market which is facing high vacancy rates and softer demand, particularly in the face of rising interest rates.

Graham Clemett, chief executive officer at Workspace, said: “We have seen good consumer demand in what is typically a quieter quarter for lettings over the summer. Our strong track record of consistency driving pricing growth continued in the quarter, demonstrating the appeal of our offer to businesses looking for high quality, well connected and sustainable workspace”.

He continued: “While the churn is higher than usual, it is part of the regular rhythm of our business”, concluding with “we are encouraged by the improving leasing activity we have seen in September”.