Remember when everyone swore the office was dead?
Back in 2020 it looked like the pandemic had delivered the final blow to city-centre workspaces. Zoom became king, pyjamas replaced suits, and analysts were tripping over themselves to predict the end of the traditional office lease. Fast forward five years and something rather different is happening – people are coming back, space is getting tight, and one London-focused property company in particular looks absurdly cheap.
I’ve been digging into the numbers recently and keep coming back to the same name: Workspace Group.
The Quiet Return Nobody Wants to Talk About
Let’s start with the big picture. UK office take-up – the amount of space actually being leased – has been climbing steadily for two years. The most recent figures show the highest rolling twelve-month total since before Covid hit. That’s not just a dead-cat bounce; it’s starting to feel structural.
Here’s the kicker: while employment in typical office-based jobs has actually grown since 2019, the amount of occupied office floorspace has shrunk. Do the maths and space per worker has collapsed by roughly a fifth. Companies squeezed people in during the uncertainty, cut costs, and hoped hybrid working would solve everything.
It hasn’t.
People want proper desks again. They want collaboration spaces, decent coffee, and somewhere that isn’t their kitchen table. And in London especially, Grade-A space is starting to feel scarce.
Flexible Space: From WeWork Punchline to Serious Trend
Remember WeWork? The rocket-ship valuation, the private jets, the spectacular bankruptcy? Easy to laugh now, but the underlying shift it exposed was real. Workers – particularly younger ones – like flexibility. They don’t want to sign a ten-year lease on behalf of a company that might not exist in five years.
Demand for serviced and managed offices has blown past pre-pandemic levels. Some estimates suggest a fifth of central London office stock could be flexible or co-working space within a few years. That’s a fundamental change in how commercial property is used, and most traditional landlords are still playing catch-up.
Workspace saw this coming a long time ago.
Who Exactly Is Workspace Group?
Founded back in the 1980s, Workspace owns around four million square feet of business space, almost entirely in London and the near South East. But this isn’t your typical City tower portfolio. They specialise in converting old industrial buildings – think Victorian warehouses, former printworks, light-industrial units – into characterful, affordable offices for smaller businesses.
Over 4,000 customers, average unit size well under 5,000 sq ft, short leases, all-in pricing that includes rates, service charge, internet, furniture – the works. It’s the polar opposite of the 25-year institutional lease with upward-only rent reviews that used to define the market.
In many ways they’re the anti-WeWork: freehold-owned buildings, conservative borrowing, and a business model that actually survived 2008.
That near-death experience in the financial crisis left scars – in a good way. Management became obsessed with owning assets outright and keeping debt low. It’s a discipline that looks terribly old-fashioned until suddenly everyone wishes they’d followed it.
The Valuation That Makes You Blink Twice
As I write this, Workspace shares trade around 360-370p. Analysts who cover the stock properly (rather than just running a yield model) think net tangible asset value is heading toward 750p+ within a couple of years.
That’s a discount of almost 50%. Half price. For prime-ish London real estate.
Yes, there was a valuation markdown in the first half of the year – higher interest rates do that to property companies – but the underlying rental growth continues to chug along nicely. Like-for-like rent roll is still growing at mid-single digits, occupancy is nudging 80% (historically the level where pricing power really kicks in), and enquiries are strong.
- Current share price: ~362p
- Forecast NTAV 2026: ~754p
- Dividend yield: approaching 8%
- Loan-to-value: targeting 30% by decade end
When was the last time you saw a property company offering an 8% yield while simultaneously de-gearing and sitting on assets that independent valuers think are worth double the market cap?
New Broom, Clear Strategy
Lawrence Hutchings arrived as chief executive toward the end of 2024 with a simple but convincing plan: fix, accelerate, scale.
Fix means getting rid of the dogs – the tired buildings that soak up capex and deliver low returns. They’ve already banked £52m of disposals at close to book value and have another £150m in the pipeline.
Accelerate means upgrading the best sites and pushing rents harder where the market allows. Scale means doing more of what works without taking stupid balance-sheet risk.
It’s not rocket science, but after years of treading water post-Covid, the market seems to have forgotten that Workspace actually knows how to do this.
Yes, There’s a Debt Maturity Wall – But It’s Manageable
No investment is perfect, and the obvious bear point is refinancing risk. A big chunk of debt matures over the next three years and will roll at higher rates than the current 3.3% average.
Fair concern – except the numbers don’t look scary. Rental growth is expected to more than offset the higher interest bill, and the disposal programme largely funds the refurbishment pipeline. Interest cover dips but never gets dangerously low, and net debt barely moves.
In a worst-case scenario you own freehold London buildings. There are far worse things to be stuck with.
Where the Real Upside Lies
Perhaps the most interesting angle is what happens when occupancy moves convincingly through 85% and the market wakes up to the supply/demand imbalance in central London. Rents can move quickly in that environment – we’ve seen it before.
Add in a bit of multiple expansion as interest rates peak and fall, plus the mechanical re-rating that comes from closing that enormous discount, and you can start to see a path to very respectable returns.
An 8% dividend yield in the meantime doesn’t hurt either.
The Bottom Line
Property markets move in cycles, and sentiment is still sour on anything with the word “office” attached. That’s exactly when the best opportunities appear.
Workspace Group is a well-run, conservatively financed business operating in a segment – smaller, flexible, characterful space – that is seeing genuine structural demand growth. It owns its buildings outright, is actively recycling capital, and trades at a discount that looks increasingly irrational.
In my view this is one of the more compelling value situations in the UK market right now. The office isn’t dead – it’s just changing shape. And Workspace looks perfectly placed to profit from that change while paying you handsomely to wait.
Sometimes the best investments are the ones everyone else has given up on.
