Workspace Group, a U.K.-based office space provider, expects ongoing difficulties in renting out its larger office units in the current financial year. The company reported a decline in occupancy, particularly in its bigger spaces, with like-for-like occupancy falling to 83% in the year ending March 31, compared to 88% the previous year, according to Global Banking and Finance Review.
The drop shows a trend among commercial landlords, who have seen property values fall since the pandemic as businesses transition toward hybrid working and reduce their need for large office spaces.
Higher interest rates have also impacted both property owners and small business tenants, adding to the financial pressure.
To address these challenges, Workspace is focusing on converting larger units into smaller ones, selling assets to reduce debt, and cutting costs. The company is aiming to improve rental yields and recover lost occupancy under the leadership of new CEO Lawrence Hutchings.
Smaller office spaces showed stronger performance, with rental values for units under 1,000 square feet rising by 3.4% during the year. In contrast, rental values for larger spaces declined by 0.8%. Despite the tough market, Workspace posted a pretax profit of £5.4 million, a significant improvement from a £192 million loss the year before, largely due to tighter cost control. However, the value of its buildings, measured by EPRA net tangible assets, fell 3.3% to £7.74 per share.
