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Workspace will benefit from the post-Covid 'new normal'

The recovery of offices has been staggered, but it is happening
Workspace will benefit from the post-Covid 'new normal'
  • Big discount to NAV
  • Well positioned for office recovery

Do people want to return to the office? That’s the question you have to ask yourself if your mulling buying shares in Workspace (WKP). The London office landlord took a walloping thanks to the pandemic and share prices plummeted anew when the omicron variant hit and Boris Johnson kind-of-but-not-quite told people to work from home again.

The very flexibility that makes Workspace’s leases so appealing when people are considering whether or not to let office space again is the very thing which makes those same contracts vulnerable to a change in guidance or attitudes towards work. However, if the pandemic really is over, all signs point towards short-term leases becoming a much bigger part of the office market. Having gone through the world’s biggest work from home experiment, many companies will be unlikely to commit to 25-year office leases anymore.

The reason Workspace is uniquely positioned to benefit from this is both the quality of its spaces and the spread of them. While the company has staked its flag firmly in London, any office agent worth their salt will tell you that the capital’s sub-markets all have their own vibe and, more importantly, their own price points. 

All of which might explain why the company is now back up to 90 per cent occupancy and its assets have nudged up in value by 3 per cent. When you consider that alongside the continuing increase in workplace visits nationwide – with the Office for National Statistics calculating that we are just 18 per cent away from the pre-Covid norm – Workspace’s 22.5 per cent discount to net asset value starts to look quite appealing. Buy.

Last IC View: Hold, 865p, 17 Nov 2021

WORKSPACE (WKP)   
ORD PRICE:728pMARKET VALUE:£1.4bn
TOUCH:727p-729p12-MONTH HIGH:979pLOW: 593p
DIVIDEND YIELD:3%TRADING PROP:nil
DISCOUNT TO NAV:-22.5%NET DEBT:32%
INVESTMENT PROP:£2.37bn   
Year to 31 MarNet asset value (p)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
20181,03717010527.39
20191,08613778.932.87
20201,08872.540.036.16
2021*938-236-13017.75
202293912468.521.50
% change+0.1--+21
Ex-div: 7 Jul   
Payment: 5 Aug   
NB: 2020 & 2021 NAV figures represent EPRA net tangible assets