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Workspace shares gain as it reports strong demand and invests in office space

Analysts at Liberum expect "good like-for-like rental growth" to be enhanced by the group’s pipeline of refurbishment and redevelopments over the next three years
office
Workspace lets out offices, studios and workshops in London

Workspace Group plc (LON:WKP), which provides office space in London, reported a dip in the number of enquires and lettings in the first quarter but said customer demand remained strong.

The company said lettings in the quarter ended June 30 averaged 88 per month, compared to 93 the same time a year ago. Enquiries averaged 1,021 per month, down from the 1,016 reported last year.

In April the company completed the acquisition of the last two buildings in the Centro estate in Camden for £77mln. Workspace has purchased all seven buildings that makeup Centro, providing 216,000 sq. ft. of net lettable space, for a total of £186mln.

Workspace this month agreed to sell three small office properties, comprising 106,000 sq. ft. of net lettable space, for a total of £52mln.

READ: Workspace Group clips property portfolio again

The disposal reduced the loan-to-value ratio to 16% on a proforma basis at the end of June from 18% at the end of March.

Refurbishments and redevelopments

Last month the company also finished the refurbishment of China Works in Vauxhall, a 67,000 sq. ft. building. At the same time, it launched two new buildings including the Cocoa Studios at The Biscuit Factory in Bermondsey, and The Fuel Tank in Deptford, providing 80,000 sq. ft. of extra commercial space.

The group expects to complete another six refurbishment projects over the nine months to 31 March 2019, adding 310,000 sq. ft. of new and upgraded space.

Workspace exchanged contracts for the redevelopment of Marshgate, adjacent to the Olympic Park in Stratford, this month.

In support of its refurbishments and redevelopments, the company last month raised £179mln in a placement of 16.3mln new ordinary shares.

READ: Workspace Group to tap market to fund growth

The firm ended the period with net debt of £430mln and undrawn facilities of £235mln. 

"In a year in which we are launching a significant amount of new and upgraded space from our project activity, it is pleasing to see continued strong customer demand driven by our in-house marketing platform," said Jamie Hopkins.

"With a strong balance sheet, we are excited about the opportunities for further investment in our extensive project pipeline and are actively exploring acquisition opportunities where we believe we can create superior value for shareholders."

Liberum maintains 'buy' rating

Liberum maintained its 'buy' rating and target price of 1,225p, saying the sustained good demand and existing space in the first quarter, provides reassurance in its full-year forecasts. The broker said the recent placing provides firepower to deliver further expansion, while capital recycling continues to highlight value within the portfolio.

"We expect good like-for-like rental growth to be enhanced by the group’s significant pipeline of refurbishment and redevelopments over the next three years, supporting strong earnings growth."

In morning trading, shares rose 2.3% to 1,103p. 

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Workspace Group plc Timeline

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