As with any property, occupancy rates are a key profitability swing factor: Victory claims all of its sites are at least 80 per cent occupied, with the exception of its 72 per cent full 420 George St digs in Sydney that only opened in March.
As of 2017, research house Frost and Sullivan valued the “Flexible office solutions” sector at $960m, with serviced offices accounting for 51 per cent and the go-go co-working sector accounting for 18 per cent.
Victory reckons flexible workspaces still only account for 1.6 per cent of office space in Melbourne and 2.6 per cent in Sydney, compared with 4 per cent in London, 3.9 per cent in Singapore and 8 per cent in Shanghai.
Citing various industry reports, Victory expects also 30 per cent of Australia’s total office space to be classed as ‘flexible’ by 2030: 8.5 million square metres compared with 505,000 sq m now.
The headwinds were felt in the first half that saw Servcorp boosting revenue by 5 per cent to $164 million, but posting a statutory loss of $12.8m after writing off $17.7m of leasehold improvements.
At the company’s February 23 full year results investors should expect another 8c/sh, implying a roomy yield of 5.7 per cent.
Like Flexigroup in the ‘buy now pay later’ sector, Servcorp looks like a well-established enterprise overlooked by investors in favour of new trinkets on offer.