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Workspace Group’s profits blossom as employees return to the office

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Workspace Group profits boosted by employees returning to the office as normality resumes after Covid curbs

  • Profits at Workspace jumped to £35.8m within the six months ending September 
  • Workspace noted it was ‘currently seeing continued levels of fine demand’ 
  • Land Securities revealed on Tuesday that it made a £192m half-year loss

Workspace Group has seen earnings grow greater than tenfold following an increase in property revaluations and a continued rebound in rental income.

Profits at the true estate investment trust totalled £35.8million within the six months ending September, against only £3.4million within the equivalent period last yr.

Higher pricing and occupancy levels helped drive the overwhelming majority of profits because the absence of Covid-related restrictions within the UK led to more firms encouraging their employees to return to offices.

Comeback: The absence of Covid-related restrictions within the UK has led to more firms encouraging their employees to return to working in offices this yr

Net rental income shot up by 36.8 per cent to £56.1million, with slightly below half the expansion being contributed by the McKay Securities business, which Workspace acquired in May.

This pushed after-interest trading profit up by a 3rd to £29.1million but, unlike last yr, overall profits were higher because of an £8.1million increase within the fair value of its investment properties.

Real estate consultancies CBRE and Knight Frank estimated the firm’s holdings at £2.86billion, in comparison with £2.4billion at the identical point in 2021.

The FTSE 250 group also profited from selling a Newbury medical centre that it had bought from McKay, while a separate development in Wandsworth is anticipated to have its £55million sale accomplished in January.

Workspace moreover forecasts an extra expansion in rental income in the course of the second half of the financial yr, but warned that inflationary pressures would result in higher service charges and administrative costs.

Much of the recent rise in administrative costs derived from salary bumps of three per cent for employees, although junior employees have received larger hikes, and better share-based payments. 

Valuation: Real estate consultancies CBRE and Knight Frank estimated Workspace Group's holdings at £2.86billion, against £2.4billion at the same point in 2021

Valuation: Real estate consultancies CBRE and Knight Frank estimated Workspace Group’s holdings at £2.86billion, against £2.4billion at the identical point in 2021

Workspace also told investors that the business was ‘currently seeing continued levels of fine demand’, while energy costs have been hedged for the following two years and rent collection rates are near 100 per cent.

Graham Clemett, the chief executive of Workspace, said: ‘Despite the present economic challenges, we’re well placed to deliver a robust trading performance for the total yr.

‘We’ve good momentum from the rental growth in the primary half, and we’re seeing resilient customer demand into the second half of the yr.

‘We are going to proceed to pursue our disposal programme where the reduction in income from disposals can be offset by the same level of interest cost saving.’

Workspace Group shares closed trading 1.9 per cent lower at 472.4p on Tuesday, meaning their value has declined by around 43 per cent previously 12 months.

Land Securities also reported its latest interim results today, though they were far less positive than Workspace’s trading update, with the business tumbling to a £192million loss, having made a £275million profit the previous yr.

The blue-chip listed business, which owns the Bluewater shopping centre in Kent and One Recent Change near St Paul’s Cathedral, blamed the loss on the falling valuation of its office buildings in London.

Corporations have been more reluctant to lease office space in prime UK locations as rate of interest increases by the Bank of England amidst a broader cost-of-living crisis have depressed demand.

This latest struggle facing the business real estate sector comes on top of the issues it’s experiencing from the surge in hybrid working and online shopping accelerated by the coronavirus pandemic.

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