Workspace warns higher costs and lower rents to hit profits next year

London flexible office company Workspace has warned that higher labour costs and larger companies leaving offices is set to hit its profits in the year ahead.

Shares in the firm tumbled by about 12% on Friday morning.

The business has previously said confidence among some of its customers has been weakened by wider economic uncertainty.

This has led to some larger companies exiting offices and work spaces they rent through Workspace, and a lower rent income at the start of the financial year.

Workspace owns a portfolio of about 70 properties across London and the south-east of England, providing units to more than 4,000 businesses.

Over the first three months of the year, rents totalled £139 million, slightly higher than the previous quarter.

But the company said it is grappling with higher business costs including national insurance contributions and living wages, which both increased from April, as well as additional costs to refinance the business.

On Friday, Workspace said it is expecting the combined impact of these factors to impact its trading profit for the year to the end of March 2026 by about £7 million.

It had previously been expecting profits to come in between £66 million and £72 million.

It is nonetheless still expecting profits for the latest year to meet forecasts, and is set to unveil plans to bring in more businesses and grow its income in its full-year results announcement in June.