Office space firm CLS slips to a loss as interest rate rises hit valuations
Office space firm CLS slips to a loss as interest rate rises hit valuations
- The company reported a £106.4m pre-tax loss for the six months ending June
- Higher net rental income was offset by the falling value of its property portfolio
Office space specialist CLS Holdings has swung to a significant loss as interest rate hikes take their toll on the commercial property market.
The FTSE 250 company reported a £106.4million pre-tax loss for the six months ending June, compared to a £21.4million profit in the equivalent period last year.
Although the group’s net rental income tipped up by 5.6 per cent to £55.6million, this was offset by a £142.3million slump in the overall value of its real estate portfolio.
Results: CLS Holdings has swung to a loss amid challenges in the commercial property market
Around half the decline occurred in the UK, where rising rates have hit the business as a result of 14 consecutive Bank of England hikes.
Its portfolio in Germany also saw a big drop, as rising rates combined with adverse foreign exchange fluctuations.
The London-based firm warned that the challenges facing the property sector are likely to persist until interest rates have ‘definitively peaked’.
But it added that demand is showing signs of recovery, with more employers encouraging staff to work more regularly in the office rather than at home.
Fredrik Widlund, chief executive of CLS, said the company ‘remains focused on executing operational and portfolio improvements, and our geographic diversity and high-quality properties continue to provide resilience and performance.
‘Recent lettings are encouraging and demonstrate our ability to capture opportunities for our properties when they arise.’
Nonetheless, CLS Holdings shares were 5.7 per cent, or 8.2p, lower at 135.2p on late Wednesday morning, making them the biggest faller on the mid-cap index.
Founded as Central London Securities in 1987, CLS operates dozens of buildings, with a particular concentration in London and the South East, that are home to more than 700 tenants.
It was one of the three original partners in the Shard skyscraper before selling its stake in 2008 at a £25million loss to a consortium of Qatari investors.
The group’s results come a day after fellow workspace rental firm IWG credited the hybrid working trend for record turnover and operating profits more than doubling in the first half of 2023.