Workspace Group (LON:WKP) outlined a plan to reposition itself as an “earnings-focused business” after reporting weaker full-year 2026 results, with management saying the London office provider will simplify pricing, invest in refurbishments and pursue further disposals to fund higher-return projects.
Chief Executive Officer Charlie Green, who joined the business a little over four months ago, said the year had been “difficult” and that the company needed to adapt to a flexible office market that has evolved around changing occupier expectations. However, he emphasized that Workspace was starting from a stable position rather than responding to a sudden deterioration.
Profit Falls as Portfolio Valuation Declines
Chief Financial Officer Tom Edwards-Moss said net rental income for FY 2026 was GBP 113.4 million, down 7.1% from the prior year. Excluding the impact of disposals, underlying net rental income declined 2.4% year over year.
Trading profit after interest fell 9.4% to GBP 60.5 million. After revaluations, disposal losses and exceptional items, Workspace reported a loss before tax of GBP 120.5 million.
The company’s property portfolio declined 7% to GBP 2.1 billion. Edwards-Moss said the like-for-like valuation decline was driven by decreases in estimated rental values, with more of the pressure occurring in the first half of the year. The stabilized portfolio declined 5.6%, while the company’s largest 15 assets performed better, with an average 3% decline over the year and 1% in the second half.
Workspace’s stabilized portfolio occupancy was 81.6%, down 1.4 percentage points year over year. Green said the company wants occupancy to move into the “high 80s” and noted that Workspace has historically used rent reductions to support occupancy, a practice he described as effective in the short term but not sustainable over the medium or long term.
Dividend Policy Reset and Balance Sheet Update
Edwards-Moss said Workspace has returned to a dividend policy of 1.2 times earnings cover, which he said allows the company to retain enough funds from operations to cover maintenance capital expenditure while balancing shareholder returns.
On that basis, the company declared a final dividend of GBP 0.167 per share, taking the full-year dividend to GBP 0.261 per share, down 8.1% from the prior year.
Net debt fell 7.6% to GBP 758 million, helped by disposals, while net assets declined 11.6% to GBP 1.3 billion. EPRA NTA per share was GBP 6.87, down 11.2%.
At the end of March 2026, the company had GBP 761 million of drawn debt and more than GBP 240 million of available liquidity. Edwards-Moss said the company has “significant headroom” on covenants and no maturities in 2026. Its 2027 maturities can be covered from existing liquidity.
Workspace also exercised the extension option on its GBP 200 million revolving credit facility, moving maturity to June 2030. Edwards-Moss said the company is shifting its credit rating to Fitch, which initiated coverage at BBB- with a stable outlook. He said Fitch rates more of the U.K. property sector and that its methodology is more appropriate for Workspace’s scale.
Management Plans Pricing, Product and Brand Changes
Green said Workspace’s historical pricing structure has become too complex, with different leases including or excluding items such as service charges, Wi-Fi and electricity. He said simplifying pricing could improve the customer experience and allow the company to build in an operating margin.
Workspace plans to divide its offer into two main products: “space,” a simpler room-only offer, and “managed,” an enhanced product with fitted-out offices, furniture, meeting rooms, phone booths, plants, artwork, cleaning and maintenance.
Green said the managed offer should command a net premium to estimated rental value rents of around 30% to 40% compared with a traditional basis, though he said the difference between space-only and managed products will vary by building.
The company also intends to increase revenue from building amenities, particularly meeting rooms. Green said meeting rooms are the most sought-after amenity and can generate higher revenue per square foot than office space at certain utilization levels.
Workspace is also pursuing a rebrand and technology initiatives, including agentic AI for out-of-hours inquiries, AI in credit control and data-driven improvements in facilities management. Green said AI is intended as a tool to improve performance, not to replace employees.
Disposals to Fund Refurbishment Program
Workspace is already pursuing GBP 200 million of disposals under its existing strategy, with GBP 75 million remaining to be completed. Management said the company is on track to deliver that program by year-end 2027 and is considering a further GBP 100 million of disposals.
Green said the company is examining all assets and that there are “no trophy assets” excluded from consideration. He said the company is assessing how each property fits with Workspace’s future brand and strategy, as well as the potential upside from investment.
The capital raised is expected to support low-risk refurbishment projects rather than new-build developments. Green said construction costs are too high for Workspace to pursue new-build projects in the current market.
For FY 2027, Edwards-Moss guided to capital expenditure of about GBP 55 million, most of it directed toward value-add projects. In future years, he said CapEx is expected to be closer to GBP 45 million annually, including just over GBP 30 million of value-add investment. Over five years, he said the plan is currently around GBP 200 million of CapEx, though the company may deploy more capital faster if attractive opportunities arise.
Medium-Term Earnings Ambition
Workspace identified four case-study buildings for the first stage of its strategy: Salisbury House, Cargo Works, Edinburgh House and Centro in Camden. Edwards-Moss said total CapEx across the four buildings is expected to be under GBP 20 million, with management targeting incremental yields on cost in the mid-teens or better and unlevered target internal rates of return in the early teens or better.
Management set out a medium-term ambition to lift trading profit before interest to more than GBP 125 million, compared with an adjusted starting point of about GBP 80 million after stripping out disposals and non-recurring items. Edwards-Moss said the improvement would come from occupancy growth, contracted rent increases, enhanced products and pricing, operational efficiencies and additional revenue from amenities.
Analysts asked whether the profit recovery would be steady or back-end weighted. Edwards-Moss said some near-term actions are available, but higher pricing will require investment in buildings, making the uplift “more back end weighted.” He also said profitability is likely to trough in FY 2028, as refinancing costs could outweigh early operating improvements.
Green said the company’s opportunity lies in what he called the “best value” segment of the flexible office market, targeting small businesses, SMEs, startups and scale-ups. He said Workspace does not plan to imitate premium operators but instead aims to improve its offer while maintaining a value position.
“This is not about cheap,” Green said. “This is about giving people the best value.”
About Workspace Group (LON:WKP)
Workspace is London's leading owner and operator of flexible workspace, currently managing 4.7 million sq. ft. of sustainable space at 79 locations in London and the South East. We are home to some 4,000 of London's fastest growing and established brands from a diverse range of sectors. Our purpose, to give businesses the freedom to grow, is based on the belief that in the right space, teams can achieve more. That in environments they tailor themselves, free from constraint and compromise, teams are best able to collaborate, build their culture and realise their potential.
