American shared office group WeWork is aggressively expanding with a presence in 16 countries including the UK. This is creating intense competition for the likes of IWG (IWG) which recently issued a profit warning wiping off a third of its market value.

Sector peer Workspace (WKP) has so far proved to be a resilient player – but for how long?

Results for the six months to 30 September showed strong tenant demand with like-for-like rental growth of 4.1% to £46.1m and an adjusted trading profit of £29.4m.

WeWork has a big balance sheet which has enabled it to expand at a rapid pace and offer substantial discounts. In contrast, Workspace chief executive James Hopkins says: ‘Owning our properties in the right locations across London, combined with a deep understanding of and direct relationships with our customers, provides us with a key market advantage and further prospects for growth.’

Workspace’s half year dividend was hiked by 30% to 8.84p. Despite this robust performance the market remains relatively unconvinced with the shares drifting back after an initial rise in response to the results on 8 November.

Stockbroker Numis warns Workspace’s claim to have differentiated product may be tested as competition continues to ramp up.

Analyst Paul Gorrie says: ‘This adds a layer of caution to the Workspace outlook – as supply grows, particularly if heavily discounted, it will become increasingly difficult for Workspace to drive prices and rental growth forward.’ (TS)

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