Office space company CLS suffers losses as interest rates rise and valuations are hit
- The company reported a pre-tax loss of £106.4 million for the six months ended June
- Higher net rental income was offset by the decline in value of the property portfolio
Office space specialist CLS Holdings has suffered a significant loss as interest rate rises take their toll on the commercial real estate market.
The FTSE 250 company reported a pre-tax loss of £106.4m for the six months ended June, compared to a profit of £21.4m in the same period last year.
Although the group’s net rental income increased by 5.6 per cent to £55.6 million, this was offset by a £142.3 million drop in the total value of the property portfolio.
Results: CLS Holdings has turned loss-making amid challenges in the commercial real estate market
About half of the decline was in the UK, where rising interest rates have hit business following 14 consecutive Bank of England hikes.
The portfolio in Germany also experienced a major decline, as rising interest rates were accompanied by unfavorable exchange rate movements.
The London-based firm warned that challenges to the real estate sector are likely to continue until interest rates “finally peak.”
But it added that demand is showing signs of recovery, with more employers encouraging staff to work 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 seize opportunities for our properties as they arise.”
Nevertheless, CLS Holdings Shares were 5.7 percent, or 8.2 pence, lower at 135.2 pence 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, home to more than 700 tenants.
It was one of three original partners in the Shard skyscraper before selling its stake to a consortium of Qatari investors in 2008 for a loss of £25 million.
The group’s results come a day after fellow workspace host IWG credited the hybrid work trend for record revenue and more than doubling operating profit in the first half of 2023.