Servcorp: Interim result 2018

In its 2017 result, Servcorp noted that the shared office space industry is ‘in unprecedented transition; we are seeing many new participants and as a result the global shared workspace market is growing rapidly'.

Proving again that a fast-growing industry doesn't necessarily result in increasing profits for incumbents, Servcorp's interim result suggests the rapid growth of co-working space is starting to take its toll.

Two figures stand out: like for like floors occupancy fell to 72% from 74% at the full-year result. And all floors occupancy also fell, from 73% to 71%.

This is unsurprising given the threat from the breakneck expansion of competitors such as WeWork and IWG, which management also implicitly acknowledged during the 2017 result by revealing that Servcorp would slow capacity growth in 2018 to concentrate on improving occupancy in its existing locations. Servcorp has also begun to ‘reshape' its portfolio to ‘modernise current fit-outs and to embellish their ecosystem to incorporate coworking'. 

CEO Alf Mouffarrige has labelled this ‘coworking for grown-ups' but time will tell whether Servcorp's traditionally premium offering and its move to adjust its portfolio for the coworking boom will protect it from oversupply and/or a cyclical downturn in demand for office space.

The company is also pursuing ‘strategic moves' to take advantage of this expansion. These potentially include ‘the acceleration of growth in various markets, accessing external sources of capital to aid in global expansion, the potential separation of geographies (including Europe and the Middle East) and unlocking value inherent in our footprint and technology platform'. HOLD. 

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