Workspace CEO: Wework recovery poses no threat to business as firm hikes dividend
The chief executive of one of London’s biggest flexible hybrid providers, Workspace, said rival Wework has done a “lot of good things” for the sector as the chain emerges from Chapter 11 bankruptcy.
On Wednesday, the troubled co-working provider hailed the end of a restructuring of its offices in both the UK and Ireland.
The American firm, which was beloved by corporate workers for its trendy layout and office perks, has trimmed down its estate from about 50 to 40 offices across the area.
It also shut down a handful of offices in London and a flagship building in Manchester as part of the restructuring and secured new leases with landlords to whom it pays rent, according to a report in PA.
Last November, the firm filed for Chapter 11 bankruptcy in the US after racking up hefty debts but hopes to emerge from this situation by this month.
When it was founded in 2010, the company quickly grew in popularity but fell on hard times after the pandemic forced employees into remote working.
Wework’s uncertain future left many worried about the sector’s state, but fellow providers in the space assured them its wobble would not impact trade.
Outgoing boss Graham Clemett told City PM Wework had done a lot of good things for the flexible space market and made flexible working “much more mainstream product”.
Clemett, who will step down as chief next January, said he does not see its rebound as a threat.
His business tends to cater to smaller companies and those in the fashion and production industries.
This means that, often, they require a physical space to carry out their job, unlike the typical office worker who would have used a Wework.
The firm, which has 78 buildings across London and the South East, upped its dividend on Wednesday as a decision to raise rents across its buildings helped push profit higher.
The value of its portfolio slumped 9.5 per cent to £2.4bn, largely due to the sale of non-core assets to strengthen its balance sheet.
Throughout the year to March, the business completed 1,238 lettings and 705 lease renewals worth £53.3m. On a like-for-like basis, the company’s rent roll jumped 9.6 per cent.
Its rent per available square foot was lifted by 10.4 per cent to £44.27.
Clemett said he expected rental growth this year to be slightly slower but noted a “vibrancy and strength of demand” for the space in its business centres across London.
Shares in Workspace added five per cent on Wednesday following the announcement.
Mark Crouch, analyst at investment platform eToro said “The commercial property market suffered more than most during the pandemic. Work from home models remained in place, and with business owners choosing to downsize to accommodate the hybrid model and cut costs, Workspace Group found themselves in a tight spot.
“Despite these challenges, demand in the capital has remained strong and although shorter leases have resulted in frequent turnover, Workspace Group have capitalised, using the breaks to nudge rents higher while maintaining an occupancy rate of 88.1 per cent.”