Okay, I think we're settled. Great to see so many of you here today. Well, good morning, everyone, and welcome to our half year result presentation, both of you here in person and those joining us remotely. As you can see, I'm joined today by both Dave Benson, our CFO, but also Leo Shapland, our Head of Portfolio Management. For those of you who haven't met Leo before, Leo's responsible for both our asset management and our development activity across the group. Turning to the agenda for today, we'll start off with an overview from myself. I'll then hand over to Dave, who will take you through the financial results in more detail, including the outlook for the year. Leo will pick up on operational performance.
What Leo will give you is hopefully a little bit more of a deep dive into the operational activity across the group, both on our like-for-like portfolio, our projects, and also our sustainability credentials. I'll then finish with some thoughts around our outlook longer term. In terms of performance, well, as you know, last year it was very much for us to focus around recovering from the impacts of COVID. I'm delighted that by March of the last financial year, we got back to our stabilized occupancy levels, our target of around 90%. Our performance in the first half of this year really very much builds on that solid base. On the back of continuing good customer demand, what we've been able to do is drive our like-for-like rent per sq ft up 4% in the first half of the year.
That, together with actually the successful letting up of new and vacant space, both in our core portfolio and also with the McKay assets that we acquired, has meant we've been able to deliver a strong growth in trading profit in the first half of the year. 33% increase year on year. On the back of that, we're increasing our interim dividend by 20%. Now from a valuation perspective, a slightly different story, a stable outlook, stable performance in the first six months. Actually, I'm very pleased with that. We did see an outward shift in yields in our like-for-like portfolio, but actually, that was more than offset by the growth in ERVs that we saw in the first half of the year.
In terms of acquisitions, delighted to say that also we've completed the operational integration of our McKay acquisition ahead of schedule. We still have a job of work to do to complete the sale of the non-core assets from that portfolio. Nevertheless, we're in a sound financial position with LTV stable at 33%. Before I hand over to Dave, I just want to run through sort of three key characteristics of our customers, hugely important for us as a business. First of all, the resilience of our customers over time. What I've got on this slide here is the details of our inquiries, like to like occupancy, and the increases and decreases in rent per sq ft over the last 15 years.
What I think, first of all, I'd really like to highlight is that consistency of demand from customers for our flexible offer over that 15-year period. Even through the depths of the global financial crisis in 2008 and 2009, and through to COVID in 2020, 2021, we've seen consistent levels of demand for our product. What does that mean? Well, that does mean that actually, with our dynamic pricing, we can address falls in occupancy quickly, and we can flex our pricing. As you'll see in 2009, as occupancy fell, we flexed pricing. In COVID, the challenges of recovering occupancy through the impact of COVID in 2010, we flexed pricing.
Equally, outside those periods, we can then actually push pricing quite strongly on the back of that strong demand, as you can see with the predominance of green bars across that chart. What I would lastly highlight is actually, in the recent years, we've been able to push, well, last year, we've been able to push pricing upwards again, 4% in the first half of this year. You'll see that we're actually still only on the way back in recovering pricing from pre-COVID levels. We're currently around 5% below pre-COVID levels of pricing. Secondly, I just want to talk about the customers' use of space in our portfolio. It's a hugely important part of our business model, is that we provide our customers with a blank canvas to fit out.
We provide all our units with the essential services, but we allow our customers to fit out their space as they want. They want that control to build their own individuality around their space. What you'll see in these photos, these are just six pictures looking through the keyhole at the units across our portfolio. You've got here an advertising agency, a clothing business, a marketing agency, a video production business, a plant-based food lab, and a podcast broadcaster. These are just six samples of what you'd see if you look through the keyhole across our 4,000 customers in the portfolio. What you'll see there is the space is really very much an integral part of their business.
Indeed, when you reckon there's about, across the portfolio, around half of the space is used in a, what I would describe as a non-traditional way. It's very much work space as opposed to office space. When you look at the resilience of our customers in terms of customers staying with us, and equally, it's the utilization of that space, customers coming to work every day, we have high levels in both counts. That's because of this nature of the way our customers use their space. It's an integral part of their model. That's what really sets us apart, I'd say, in that flex market from others at play in that market. It's sometimes the frustrations that we have when people confuse us with the service office players. This is a very distinctive, separate type of model.
Then lastly, I just wanted to touch on the geographical spread of our customers. This is something that we've shown before, the research that we've done around the spread of SMEs across London. Just wanted to re-highlight it, that the research we did shows that around 25% of the SME community is in the more central London areas. There's a very much broader spread of the SME community across London. If anything, we're seeing that broaden post-COVID with reduced appetite for commuters to do longer commutes. Equally, the new transport links, the final opening of Crossrail, equally the Northern Line extension, they're opening up new areas of London, such as in Battersea. Increasingly also, we're seeing alternative transport methods being used, particularly cycling. All of these we see broadening the opportunity for us across London.
Indeed, we also see that extending out to the well-connected commuter towns with good transport links into the capital. Just to recap before I hand over to Dave, we've had a really good strong trading performance in the first half. We're seeing that momentum carrying on to the second half of the year. I think we're very well set for a very strong trading performance for the full year. On that note, I'd like to hand over to Dave.
Thanks, Graham. Morning, everyone. As Graham said, I'll first run you through the financial performance for the half year and then touch on the outlook for the remainder of the financial year. Starting with operating performance, net rental income was GBP 56.1 million, up 37%, reflecting the strong increase in occupancy and pricing that we've seen over the last year, combined with the benefit of acquisitions. Admin expenses also reflected the impact of acquisitions, increasing 31%. However, underlying admin expenses remained under tight control with a 6% increase driven by higher staff costs. Admin costs from acquisitions were GBP 1.5 million in the first half, and we remain on track to deliver the planned synergies.
Net finance costs were up 49%, reflecting the increase in the level of debt following the McKay acquisition and the increase in SONIA during the period. Trading profit after interest was therefore up 33% to GBP 29.1 million. We saw an underlying increase of GBP 8.1 million in the property valuation, and this, together with a GBP 1.5 million gain on disposals and one-off cost of GBP 2.9 million, resulted in a profit before tax of GBP 35.8 million and Adjusted EPS up 28% to 15.3p. In view of the strong performance in the first half, we will be paying an interim dividend of 8.4p, up 20% on the prior year. Slide 10 looks at the movement in net rental income in a bit more detail.
Over the last year, we've seen occupancy increasing back to pre-COVID levels and pricing recovering, and this resulted in an 18% increase in underlying rental income. As expected, as occupancy has increased, we've seen a reduction in unrecovered service charge and other non-recoverable costs. With our centers full again, our customer events program is back in full flow, and this has contributed to a GBP 0.4 million increase in other sundry costs. Cash collection remains strong, and the charge for expected credit losses fell again in the period. The acquisition of McKay in May contributed GBP 7.3 million of rental income in the first half, in line with expectations. As I mentioned, our unrecovered service charge costs are reduced in the period. We work hard to control our costs, and this benefits both us and our customers.
Our people are by far our greatest operational cost, accounting for around a quarter of service charge costs and around three-quarters of admin costs. We've generally limited pay rises in the current year to 3%, although we have targeted higher increases in more junior roles. People costs are also the main driver of other significant service charge costs, such as cleaning, security, and maintenance. Our commitment to paying the London Living Wage extends not only to our own employees, but also to those of our service partners. After people costs, the next most significant operational cost is utilities, which accounts for around 20% of service charge costs. Electricity is by far the largest component of this, and we fully hedged our costs in September 2021 until October 2024, and this extends to the McKay portfolio.
Leo will talk about some of our capital projects in more detail later, but we continue to perform rigorous viability assessments before deploying any capital, and continue to fix the majority of costs before commencement. On the balance sheet, the property valuation at 30th September increased to GBP 461 million to GBP 2.9 billion, reflecting the acquisition of the McKay portfolio. Debt increased similarly with total net assets up 4% driven by the profit for the period and the net impact of shares issued and dividends paid. Overall, EPRA NTA per share was down 1 percent to GBP 9.74, reflecting the impact of dilution from the shares issued. On an underlying basis, adjusting for capital expenditure and including the McKay assets at acquisition cost, there was a small underlying increase of GBP 8 million in the property valuation.
Looking at the like-for-like portfolio, which accounts for around two-thirds of the overall value, the small underlying increase was driven by a 7.5% uplift in ERV per sq ft to GBP 45.41, and that was offset by a 30 basis point movement in yields with equivalent yield moving out from 5.6%-5.9%. Capital value per sq ft was up 2% to GBP 692. In completed projects, we saw a similar dynamic with ERV and yield movements offsetting and valuation flat. In the refurbishment and redevelopment categories, we saw an overall decrease. Much of this was driven by a more significant average yield movement across light industrial sites such as Havelock Terrace, Riverside and Rainbow Industrial Estate.
We also saw decreases at Chocolate Factory and Leroy House as the valuations transition from investment to development, reflecting the commencement of work on site. Turning to the McKay portfolio. Overall, we've seen a valuation uplift of GBP 14 million since acquisition, which reflects the discount we paid compared to the March valuation. The uplift was driven by London and South East offices, which have held their value since March, with yields moving out slightly to 6.2% and 7.9% respectively, largely offset by rent improvements. South East Industrials, however, saw a valuation decrease compared to both March and acquisition. This was fundamentally driven by a far more significant outward yield movement over 100 basis points since March, with average yields now at nearly 5%.
As we've seen, with the exception of light industrial properties, the impact of yield movement of the Workspace portfolio has been largely offset by ERV improvement. Yield movements have been driven by economic and political events, and while there have been signs of increasing stability in recent weeks, volatility remains. ERV movements, on the other hand, have been driven by the pricing that we're achieving on recent deals.
Please start.
Leo will talk about later, pricing momentum remains strong. On this slide, and it is this slide, we show NTA per share would change for a range of movements in ERV and yield on the like-for-like portfolio. As an example, a further 50 basis points outward yield movement would be largely offset by a 5% increase in ERV. With NTA in that scenario, the share falling down just 3% to GBP 9.42. Onto net debt and cash flow. The cash conversion remains strong with 98% of rent for the first half collected to date. This has generated operating cash flow of GBP 30 million, which has more than covered dividend payments of GBP 26 million.
We spent GBP 363 million on acquisitions, which comprised GBP 201 million of cash consideration and fees and GBP 162 million of net debt acquired. We also continue to invest in our planned pipeline of refurbishment activity with CapEx of GBP 25 million in the first half of the year. Overall, therefore, net debt increased to GBP 937 million at the end of September. The majority of the group's debt comprises long-term fixed-rate borrowings, which totaled GBP 665 million at the end of September. Shorter-term liquidity is provided by GBP 535 million of bank facilities, which were GBP 285 million drawn at the end of September.
Those facilities, together with GBP 13 million of cash, gave us a total of GBP 263 million of cash and available facilities. Our average cost of debt was 3.5%. At current debt levels, a 1% increase in SONIA would increase this by around 0.3%, which based on current market expectations for SONIA, would mean a full year average cost of debt of around 3.7%. We have significant headroom to our financial covenants with LTV at 33% and interest cover of 4.5 times. Our planned asset disposals will further reduce both leverage and our exposure to floating debt. Looking at our debt facilities in a bit more detail. As I said, the majority of the group's debt is long-term fixed rate borrowings.
It's made up of GBP 300 million green bond, which matures in 2028, GBP 300 million of private placement notes maturing between 2025 and 2029, and a GBP 65 million loan facility from Aviva, which matures in 2030. We completed the necessary amendments to both the Aviva and the McKay bank facilities in September. The bank facility reduced to GBP 135 million, and the terms have been aligned with Workspace's existing RCF. There were no changes to the maturity, quantum, or interest rate of the Aviva loan. Our bank facilities now comprise GBP 335 million of sustainability-linked revolving credit facilities and a shorter-term GBP 200 million facility put in place for the acquisition of McKay.
GBP 135 million of the revolving credit facilities mature in April 2024, and GBP 200 million in December 2024. Both of these facilities have the potential to extend by up to 2 further years, and the GBP 200 million RCF also has the option to increase by up to GBP 100 million subject to lender consent. Finally, looking at the outlook for the rest of this financial year. While there remains uncertainty in the economic outlook, based on the customer demand that we're currently seeing, we anticipate stable occupancy and continued pricing growth in our like-for-like portfolio, augmented by further contribution from letting up of recent projects and acquisitions. Such pricing growth should drive not only rental income, but also ERV, helping to mitigate yield pressure on valuations. The current high levels of inflation will continue to put pressure on costs.
However, we're well-positioned, with energy costs fully hedged and other costs tightly controlled. Capital expenditure this year will be around GBP 50 million as we continue with our project pipeline. Although this will be more than offset by planned residential scheme disposals at Riverside and Chocolate Factory, as well as disposals of non-core McKay assets. We have a robust balance sheet, and all commitments can be funded from existing facilities. Overall, we remain in a strong position with positive momentum, although we will of course, respond to any changes as needed, resulting from economic conditions. I'd now hand back to Leo to talk you through our operational performance in more detail.
Okay. Thank you, Dave. Morning. Over the coming slides, and the coming section, we'd like to highlight some of the progress we've made over year-to-date, some of the momentum and signs we're seeing since the end of the half year going into the second half of the year, and evidence some of the key trends and key messages that we've seen from the portfolio with a number of case studies. The key message we'd like to leave you with today is we've had a really positive first half year, and we see good momentum going into the second half of the year, evidenced across a number of lead indicators from the portfolio. Fundamentally, we're seeing resilient customer demand for our locations, our offer, and our flexible leasing model, driving good letting volumes, occupancy figures, pricing uplifts, and resilient valuation.
Going forward, we have the ability to grow that income and improve our portfolio through two key avenues of organic growth and our active asset management and refurbishment initiatives. As Dave said, we're cautious given the macroeconomic conditions, but ultimately, we remain confident in our portfolio and the ability for us to drive performance. In terms of inquiries and viewings, down slightly year-over-year, distorted by a few events over the summer around extreme hot weather, numerous strikes to tube and rail. More significantly, we've seen lettings value increase year-over-year, reflecting strong conversion and our improved pricing. In relation to that, looking at the right-hand side of the slide, you can see, as Graham mentioned, we've seen a rebound in occupancy since COVID, and as a result, we're able to enhance pricing across the portfolio and has subsequently seen our fourth consecutive quarter of growth.
Drilling down into the like-for-like portfolio, we've seen occupancy remains solid over the half year at just shy of 90%. As a result of that, we've seen both rent per sq ft and overall rent bill up by about 4% over the half year. Much of that has come from new activity coming into the portfolio, but a good portion of that has come from renewal activity within the portfolio itself. This is one of the avenues of that organic growth that we're talking about. We engaged with around 190 customers over the half year. Our knowledge of our customers, our relationship with our customers, our investment in our building and our customer service, and overall, that fundamental demand saw over 90% of our customers stay with us over the half year, resulting in an average uplift of around 14%.
A few case studies to evidence those key trends and some of the things that we're seeing and some of the ways that we operate the portfolio. At Metal Box in the South Bank. The South Bank is one of the clusters where we've probably seen one of the quickest and most robust bounce backs in demand since COVID. We've capitalized upon that with an upgrade program to the atrium reception, cafe arrival experiences, as well as a refurbishment, a rolling refurbishment program to customer units and improvements to the ESG of the asset. We completed the project and improved the EPC to be across the asset, reducing energy consumption and improving our efficiency within the building.
The customer demand and feedback for this asset and what we've done for it as part representative of the broader cluster and our broader portfolio has been really strong. Occupancy stayed over 90% throughout the half year, and we were able to enhance pricing by up to 35% on those improved units. All of this drove an improvement to valuation of around 8% despite a 20 basis point outward yield movement to 5.9%. We saw ERV increases across the center of around 15% more than offset that. At The Salisbury, another key asset for us in the heart of the city by Crossrail. Again, a rolling upgrade program to improve units, common parts, and our customer facility, our customer journey, in essence.
Really strong customer feedback for this, and we've improved rents by up to 20% on that, as well as improving ESG and the look and feel of the asset. Valuation for this asset was down over the half year, 7%, driven by the outward yield movement we saw across the portfolio, but also the commencement of our longer-range CapEx program. That CapEx program is part of the reason why we remain so positive on this asset. We've got that upgrade and rolling upgrade program on the units as they come back to us. They're often quite dated, and we get to improve both appearance and ESG and pricing as a result of that. We commenced over the half year.
We commenced the next phase of investment into the asset, improving the reception, customer lounge, and arrival experience for the entire building, as well as improving our meeting room offering and adding a 150-person conference center to the building, which we think will not just be a boost to the building itself, but the wider portfolio and the offering to our customers. At Gray's Inn Road, also in central London, this is where we tend to offer our customers larger units, but with the benefit of the Workspace flexible leasing model and flexible use. Again, rolling upgrades to units, customer amenities to improve both the look and feel, the aesthetics and the ESG. Again, improving occupancy up 11% to over 90% by half-year end with positive momentum since then.
We've improved quoting rents on those upgraded units by up to 15%. Yet again, that interconnection of ESG and rental tone and financial outcomes are visible as we're on track to hit an EPC B and future-proof the asset by the end of the year. The valuation story for Gray's Inn is representative of the story that Dave and Graham have shared for the portfolio as a whole. Outward yield shifts mitigated by ERV increases, thanks to our investment and the strong customer demand we see. Lastly, from the like-for-like portfolio, The Lightbox in West London, where again, an upgrade of units as they come back to us, targeted capital investment into common parts in the arrival experience, creating that community and buzz for the center. This has seen a really strong half year with occupancy over 95% throughout the six months.
Rent roll was improved as a result of that by up to 11% and pricing on upgraded units up by up to 35% over the half year. Again, a very positive EPC and ESG story here. Energy consumption significantly improved and EPC As and Bs hit across the board, resulting in a valuation increase of 8.5% over the half year. Turning to our completed projects. While occupancy was robust and solid over the like-for-like portfolio at 90%, we saw really strong upward momentum from our completed projects category. Occupancy increased by almost 7%- 77% over the half year. Again, showing that depth of customer demand for high-quality, sustainable space in our locations.
As that occupancy improved, we saw that pricing dynamic and that pricing tension evolve, and we were able to improve pricing and our rent roll. Rent roll was up by over 15%, and pricing per sq ft was up almost 6% to just over GBP 25. It's worth pointing out that we see and our customers see our portfolio as an affordable offering in strong locations. Here, in terms of that organic growth opportunity and our prospects going forward, the opportunity is particularly acute. At just over GBP 25, that's highly affordable and represents a number of in-place legacy leases from either the early stages of those projects lease-up or the COVID period. A good opportunity for us going forward. In terms of our recent acquisitions, first in McKay.
Since completing the acquisition in May, we've evidenced a really strong and swift integration of the portfolio into our, into our platform. We've completed over 150,000 sq ft of letting in that period since May, driving over GBP 3 million worth of rent. The majority of that activity has been in the London portfolio where the opportunity was biggest. We've completed nearly 50,000 sq ft of letting. Occupancy is at around two-thirds, with positive momentum since the end of the half year in terms of under offers, pipeline activity and agreement for leases. There is another organic opportunity for us to drive income within the portfolio on that remaining vacant space. In the South East offices and business parks, a little bit less to play for. Occupancy was static at around 90%.
However, we did complete 35,000 sq ft of leasing activity, driving around GBP 0.7 million of additional income from that portion of the portfolio. In the industrials, similar story to that shared by a number of our peers. We're seeing strong demand and rental growth, with over 70,000 sq ft of letting activity over the year, generating GBP 1 million worth of income. Strong performance from the McKay side of the portfolio. Plans have been progressed well over the half year at Busworks near King's Cross, following our acquisition of this characterful former bus depot about a year ago. We're on track to commence refurbishment in line with business plan in the second half of next year, something that we're excited about. Lastly, Aldwych and Shoreditch.
We've taken this asset to almost 90% let and have commenced feasibility studies for the broader refurbishment of this asset. This will form a great complement to our existing Shoreditch cluster, our like-for-like asset. The Frames sits just across the street and has been a consistent outperformer over the half year. It currently sits at 98% occupancy. A few more case studies just to bring it to light and evidence those key trends. At Parkhall in Dulwich, one of our larger mixed-use business centers, we've continued that rolling refurbishment program, again, to the customer experience, reception area, common areas, and the units as we get them back through the natural churn in our portfolio. We also completed the refurbishment, a 7,000 sq ft refurbishment of the top floor of one of the wings. That, since completion in October, has had really positive customer feedback.
50% of the space was under offer at completion, and we're seeing rents of up to 30% above the rest of the center, which is performing well. At Fleet Street, again, a continuation of that targeted investment program, focusing on the customer facilities and the reception. Here we've seen occupancy increase over the half year to over 80%, and we're touching 90% as it stands today. Again, evidencing that momentum since the end of the half year. We've achieved the EPC-B future-proofing the asset and are seeing rents of up to 30% greater than the rest of the center where we've refurbished unoccupied units. At Portsoken House, this is one of the McKay assets that we acquired back in May.
Around 50,000 sq ft that sits between the Salisbury that we touched upon earlier and our Aldgate Whitechapel cluster, so a great complement to our existing offering, a characterful building. At the point of acquisition, the asset was 45% leased with 5 floors vacant. Again, hopefully this evidences the speed and efficiency of the integration into our platform. We've since completed the refurbishment of 3 of those floors, achieving EPC-B, and in doing so, removing gas from the building entirely, future-proofing the asset, reducing consumption. 2 further floor refurbishments are underway, including one to be subdivided into smaller units, which we think will complement the existing offer in both the cluster and the building for our customers.
We've let two of the floors since acquisition, generating over half a million pounds worth of additional rent, including one full floor acquisition which came through the Workspace website and channels. Lastly, at Mare Street, an asset which we think really embodies the Workspace model. It's a low carbon, highly sustainable, adaptive reuse and extension of an existing building in a highly sought after location in Hackney. That location and that offer really appeals to our customer base. In this center is where we really see what Graham was talking about earlier, that breadth of occupier use, customers who create and make in this space rather than the typical just traditional office space. Mare Street has had a really successful six months.
We've increased occupancy to 85% over the half year, and as a result, has seen real pricing tension emerge in the center, with rents of up to 40% higher than the beginning of the half year. Since the end of the half year, the asset now sits at 94%, and that pricing tension continues significantly. Looking forward to our refurbishment and pipeline. Over the half year, we started on site at Leroy House, delivering around 60,000 sq ft of highly sustainable space in 2024 in our Islington cluster, which we know well and have high degree of confidence in. We've got an exciting pipeline of up to 1.4 million sq ft in locations we feel good about and know well already.
As Dave said, we're continually evaluating our projects in terms of commencement, costs, and returns to make sure that we're optimizing returns, and we're starting at the best point possible. One of the things that's advantageous to Workspace is that we have the discretion on when to do that without impacting performance. All of these sites are income producing, they're existing centers for Workspace, and we have the ability in the period leading up to the commencement of development to not only generate that income but drive improved income and enhanced income going forward. Over the medium term, in addition to Leroy House, we see the ability to commence up to 200,000 sq ft of strong viability projects over the coming twelve months. We project that will add around GBP 11 million worth of additional income into the portfolio.
Whether that's at Biscuit Factory, where we're adding not just new space, but customer amenity, end-of-journey facilities, meeting rooms, bike storage for the broader estate as a whole and our other ownership in the Bermondsey location. Or whether it's at Riverside, new build on part of the site following a successful sale to a residential developer of the other half of the site earlier in the year. Or at Chocolate Factory phase II, we could commence on that following the successful completion and lease up of phase I of that refurbishment, previously. Or Busworks, as we talked about earlier, an exciting project near King's Cross.
One of the opportunities for us in the short term that we see as really attractive from the portfolio is some of the things that we've talked about and hopefully came across on a number of the case studies, this rolling refurbishment program, in particular of older dated units. Our customers tend to stay with us on average for over five years, in some cases, many years longer than that. They often hand us back through the natural churn of the portfolio, dated space that we can enhance both from an aesthetic perspective and from an ESG perspective, and significantly improve performance. As I hope we've evidenced, we see significant rental growth opportunities from this, and when we do so, we also see a significant improvement in ESG. The two for us are often and invariably intertwined. It's not just in the units.
We see the opportunity to do that in the customer facilities, whether it's the breakout space, terraces, amenities, unit improvements or subdivision as well. If we're seeing from the customers and our demand that actually there's a strong demand for smaller units, we'll implement that and can often drive improved results as a result of that. As an extension of our meeting room offer, a positive facility for our customers. Again, just to evidence some of that in a bit more detail in terms of that interconnection of ESG and financial outcomes. When we invest into our buildings or our units, we invariably see a significant improvement in ESG. Whether that's on our larger spends, such as Vox, where we invested GBP 8 million into LED lighting, double glazing, heat pumps, the infrastructure and technology for smart metering.
We saw EPC improve to B, but more than doubled rents and doubled valuation as a result. We've seen significant improvement in both rents and EPC at somewhere like Screenworks, where we've retrofitted the entire building. Similar thing, heat pumps, air conditioning, LED lights, energy metering, things that improve the experience and the aesthetics both for our customers and see significant financial returns. Here we achieved an EPC A and saw rental uplift of nearly 20% on our upgraded units, with demand still strong. Lastly, at Parkhall, we've touched upon, where we've achieved an EPC B from rents of up to 30% above the rest of the center. We get that recognition for our sustainability and our commitment to sustainability externally across a number of credentials.
Over the half year, we've got a five-star rating from GRESB for our development platform and our focus on a highly sustainable product, something that we're really proud of. In fact, being ranked best in peer group for the same. In terms of EPCs and regulation around that, the portfolio's already 30%, future-proofed A and B. We made the ambitious commitment over the year to upgrade a further 10% to EPC A or B this year, over 500,000 sq ft, and we're well on track to do so. We're gonna address the remainder of our portfolio and our poorer performance from both energy efficiency and EPC through the majority of our refurbishment works and pipeline. We also set ourselves the target of reducing operational intensity and gas consumption scope one emissions by 5% off our existing very low base.
That, as Graham said, has been a challenge because we've increased occupancy and the way our customers utilize the building. They come into our centers. We see a significant progress on removing gas from the portfolio and are significantly ahead of that 5% target thanks to that targeted investment in the infrastructure and our vertical integration. Our teams monitor this and see this consumption on a granular daily basis and are laser-focused on improving it. We do get that recognition externally, but we think we have a few things pertaining to sustainability that really make us stand apart. When you see the increasing connection of sustainability and financial outcomes, not just for us, but in the broader market, that's something we feel really positive about as a differentiator. Firstly, we own and operate an inherently green portfolio.
Our portfolio is already 30% lower in terms of the industry best practice benchmark in terms of energy efficiency and energy consumption. Again, that vertical integration, that investment in the infrastructure and the monitoring, means we're laser-focused on the highest consuming assets on the top right of that first graph, and aiming to bring this down over the coming period and stay ahead of the pack. Secondly, our low carbon business model. Our focus on adaptive reuse of existing buildings creates a much lower carbon footprint with up to 70% lower embodied carbon on our adaptive reuse projects like Leroy House than a new build office.
Where we are extending or building new build, we're laser-focused on low carbon concrete, steel, and offering our customers a durable material-light finish, which is good for them and their customer experience, good for a financial perspective, but also very good from a carbon footprint. Lastly, as Graham said, the spread of demand of SMEs is across London. It isn't just centered on traditional centers of employment, such as the City, the West End, or Canary Wharf. We followed our customers into often up-and-coming areas, whether it's Lewisham, Poplar, Stratford, our own head office in Kennington Park, Wood Green. We see this demand spread across London. As a result of that, these are areas that are often regeneration areas or don't typically benefit from employment-based economics.
As a result, we're bringing that tax revenue, local spend, employment growth, and business growth across London, something that benefits our stakeholders, the local community, and the local authorities where we operate. To wrap up, we've had a really positive first half of the year and are seeing good positive momentum into the second half of the year. Again, evidenced across a number of lead indicators around letting volume, occupancy, and pricing. Fundamentally, we've seen no letup in the resilient customer demand we've seen over the half year. It's continued into the second half of the year and continues for our high-quality, sustainable space, our locations, and our powerful combination of flexible leasing and flexible use. Going forward, we see an attractive opportunity within the portfolio, both in terms of organic growth, but our more active hands-on asset management and refurbishment schemes.
With that, I'll pass to Graham.
Okay. Well, thank you, Leo, and hopefully you found that deep dive into the operational activity across the portfolio useful. Just like to wrap up with some thoughts around the outlook for Workspace. I guess firstly, in terms of opportunity, I see there's sort of four elements to the opportunity that Workspace has. Firstly, it's the actual customers that we've got. We've got this diverse, vibrant SME community spread across London. We are the market leaders in providing space to that community. There's still plenty to go for. We reckon it's about a 4% market share we hold today. Alongside that, of course, you've got to have the right offer for them. We think we've got the right offer. We know we've got the right offer. We've got a flexible, sustainable offer that actually very much meets their needs.
As I highlighted earlier, a blank canvas, Workspace, rather than just traditional office space. Alongside that, you've got to have the right buildings, and we own those buildings, and they've got to be in the right locations. Of course, as Leo's highlighted, there's plenty of opportunity with those buildings to upgrade and reposition them for the changing needs of our customer base. All of this, crucially, has to be supported by what we have across Workspace, a highly experienced, highly skilled team supporting the business. Alongside that, a proven and scalable operating platform. It's really combining all those four together is the power of the opportunity that we've got at Workspace. In turn, what does that mean for a financial perspective?
Well, this is a chart you've seen many times before, but I think it's always useful reminding everyone the opportunity ahead of us. Near term, there's plenty of reversion to go for. What do I mean by reversion? Well, moving all our customers up to current pricing levels. Equally, also letting all of the vacant space from the new projects we're delivering. Equally, the opportunity within the McKay portfolio. If we can do that near term, we can deliver around GBP 33 million uplift in rent roll. That equates to around a 24% uplift from the rent roll at the end of September. A very significant opportunity near term. There's more to come beyond that. We've got further pricing opportunity. As we've highlighted, there's real momentum within the business to push the pricing further.
Equally, we've got the opportunities from the further pipeline of project activity we've got in the outer years. Of course, we've got the net opportunity from acquisitions netting off against obviously some of the disposals we're planning to do. All of this is built on that scalable operating platform, and that's a really important point, so that every pound of rental income that we can generate pretty much falls to the bottom line. For every pound of income growth, we get a pound of profit growth. You get this geared growth in trading profit. Looking at our priorities, well, there's plenty to keep us busy. We've got, of course, focus on giving our customers a great level of service. We've got to balance that against meeting their changing needs and trying to capture pricing growth.
That is a delicate balancing act, particularly in the current economic challenges that all of our customers are facing. We need to tread carefully, but we do see real opportunity there. Of course, at the same time, as Dave highlighted, we've got to keep our own costs under control. Equally, I wanna make sure that we continue to invest in our brand, the profile and the reach of our brand across London. Crucially important for capturing that demand across London. We also have got to make sure that we maintain the credibility around delivering on our sustainability commitments that Leo's highlighted. It's really important to us as a business. That's also linked, as Leo's also highlighted, to actually some of the plans we have around the refurbishment, the upgrades of our space across the portfolio, which gives us also a really exciting income opportunity.
We've also gonna be continuing to look out for acquisitions, but near term, we need to complete the planned disposal program that we highlighted earlier in the year. Because underlying all that is we do need to maintain, as you'd expect, a prudent balance sheet. So overall, what I'd like to highlight, I think, is the real momentum that we've got for this year. As I mentioned earlier, I think we're in a very good place to give a good trading performance for the current year. But over and above that, I do think we've really got an exciting opportunity for growth into the future. The longer term opportunity for this business is really exciting based on that opportunity that I highlighted earlier around this vibrant customer space population we've got across London.
Okay, on that point, I'd like to thank you for your time this morning. What we'll do now is open up for any questions. We'll start from here. If I could ask you, for the sake of the people joining us remotely, if you could grab a microphone and also introduce yourselves before asking the question. John, do you want to kick off?
Well, John Cahill from Stifel. Thanks for the presentation. You've obviously had an extremely successful period operationally. One of the things I think that's been, you know, a real success story for Workspace has been your rolling refurbishment program. You've always been very good to give us really detailed cost estimation figures for that over the years, which always check out after the event. Now we're seeing build cost inflation coming through. Are you able to say whether you've managed to lock in any of those estimated costs? Or, you know, how should we think about those going forward? Is there sort of upside risk in terms of what that the actual outturn might be?
Yeah. Leo, would you like to comment on that?
Yeah, absolutely. You're right, there's been cost inflation across the board, including on our unit refurbs and the rolling refurbishment program. We retain around 80% of our customers each year, so we do have a portion of the portfolio which churns, but not all of that requires a unit upgrade. We obviously highlighted some of the units which, you know, present most, a striking difference between a dated former unit and a refurbished unit. An asset like The Frames, where we'll get a natural organic churn within the portfolio, we've maintained that asset at nearly 100% occupancy without a significant investment. Often we're investing. This is one of the things that tries to bring out with that low carbon footprint point.
When we are making investments, we're creating material like durable finishes, which, you know, will persist after a customer leaves. Obviously, we are faced with increasing costs, and we have a stable of suppliers which we work very closely with, and then sort of constantly moving them around the portfolio. We've looked at centralized procurement. It's not really an efficient means for us. Through that procurement process, with those key contractors, we can drive much more pricing tension on the costs. Lastly, I would say that, you know, we do have, in terms of an attractive risk-adjusted return on investment, we do have quite a lot of headroom in those unit refits. We see really attractive pricing uplift delivered in a very short timeline.
There is some cost inflation on the input, but we're seeing positive demand, positive pricing output as well, with good short-term returns.
Obviously on the larger, longer-term projects, we are building into fixed rate, fixed contracts, albeit they have increased in cost significantly.
Yes.
Thank you.
The majority of the committed CapEx that is related to Leroy House, and that's, you know, we fully let out that contract on a fixed price.
Okay. Sorry. Miranda?
Miranda Cockburn from Panmure. Just a couple of questions on the McKay portfolio and the industrials. Obviously the valuation's come down to about GBP 140 million. You obviously wanna sell it, get rid of it quickly, reduce your debt, et c.
Do you feel comfortable that you should be able to get rid of that at about GBP 140 million? The second question, just in terms of the occupancy, you highlighted it's around about 91%, I think, occupied. Can you just remind us what is vacant in that portfolio and whether or not that's close to being leased up?
This is on the industrials?
Yes.
Yeah.
Thank you.
On the first question, I think I'll be a hostage to fortune here. I mean, I think obviously the valuation is GBP 140 million. There is a view that yields may go up further. It's obviously at the moment not probably the ideal time to be selling. There's a lot more on the market than there's buyers, so I think there are a lot of people bottom fishing at the moment. I'd like to think that, you know, it may stabilize as we go into the new year. We have an ambition to sell that portfolio in time. I think we'll do it on a measured basis. We're not a distressed seller. As we've highlighted, it's more about reducing gearing.
I mean, the net income saving offsets the interest cost, so the income actually covers pretty much interest cost at the moment. Yeah, I mean, I think the answer is, we will sell that portfolio. I'd like to think we get somewhere around the sensible pricing that is, I think is out at the moment. We will see.
Would you sell it piecemeal, or would you prefer?
We would look at both options.
Both options.
To be honest, I think there's probably more appetite given where buyers are at the moment to buy it, to sell it piecemeal rather than in one portfolio. But if someone would like to give me an offer on the portfolio as a whole, then I'll consider it. In terms of the vacancy, there's actually one of the buildings which was vacated by a tenant in Farnborough. That's the one building that's creating the vacancy within that portfolio. We've got very strong interest actually for that one vacant industrial estate. Here we go. Sorry. Yeah. Neil.
Neil Green, J.P. Morgan. Just two quick questions, please. The first one is, you know, you talked about letting flexibly during the last few years. I'm just wondering, is there any kind of lease events or periods over the next 12-18 months where there's potential significant reversion opportunity in some of those leases that you signed during the depths of the pandemic? The second question is just around the CapEx you think you might need on that GBP 11 million of income from Leroy House and the refurbishments please.
Okay. I'll pick up the first one. Just if you can pick up on the CapEx spend for the refurbishments. Yeah, I mean, I think you know, timing is everything, and I guess COVID was pretty much two years ago now, so there's quite a lot of reversion on our just simple two-year leases, which is why you're seeing those quite strong uplifts from renewals that we've been doing in the first six months of this year. Outside that, I mean, there's just the rolling two months. We'd expect pretty much about a third of our portfolio to about, it's about a third, 'cause there are longer leases as well. About a third come up for potentially review of pricing every year. That's usually the cycle.
Sometimes accelerated, 'cause actually we find with quite a lot of our customers that they're moving before the end of their lease period, and that's moving usually to expand rather than contract, as we've always highlighted in our portfolio. I would say that actually for us, as always, the near-term opportunity to move everyone up to current pricing is strong. Equally, to move that pricing forward is also strong 'cause price discovery comes through pretty much every day in our portfolio. You know, when you're doing 150 lettings every month, there is a huge opportunity to actually move that pricing forward. On CapEx spend?
CapEx, I mean, the major one we got on site at the moment obviously is Leroy House. The total cost of that is about GBP 25 million. Cost to complete, just over GBP 20 million on that at the moment. I say that's what's making up the majority of committed cost we've got there. The other one, Chocolate Factory, which is the other one that we show on the pipeline is. That's again about GBP 20 million.
I mean, I would expect for the moment. I mean, the beauty of our project portfolio, as we've highlighted, is they're relatively small, discrete projects. We can hold them back if we need to, and I think as we did through the global financial crisis and through COVID, we will sort of hold back, push forward as we see the economy sort of hopefully move forward. I would expect at the moment, you know, CapEx GBP 50 million, probably a similar level next year. We may well by the end of March, June next year, hopefully be more in a more positive mood.
Thank you.
Yeah. Go on, yeah. Sorry.
Good morning. Hemant.
Morning.
From Kolytics. You've done a very good job of highlighting the resilience of your portfolio, and it has been very resilient over the years, even in downturns and, you know, various environments. When I look at the sensitivities that you're showing on slide 15.
I look at where the NAV or NTA can go to, and then I look at your share price. Your share price doesn't even feature on this because it's off the thing. It's obviously clearly a lot of value. I'm just trying to understand what is the market missing? We're clearly about to enter into a recession or if we're not already in one.
You know, how bad can it be? What's it missing, please?
Go on, that's a good question. I think one continual frustration we've had, you know, I say that from being here for a long period of time now, is the concerns that we have through every sort of downturn around the resilience of the SME customer base. I have to say if ever there was a proving of the resilience of our customer base, I think COVID was probably gonna be the ultimate one, but I think there's still question marks. You know, we hopefully have proven over many cycles now the resilience of that customer base. You know, it is the space they occupy with us is their lifeblood. You know, there is no alternative. You know, they, you can't run a photographic business from home if you...
You can't do, you know, the sorts of businesses are in our properties. It's really the DNA of their business is really interlinked with the space they've got. That resilience, I think is something that people forget about. I say the opposite. I think, you know, they are the lifeblood of UK plc, that smaller business community. I think there sometimes is an unbalanced focus on larger corporates when smaller SMEs are really the driving force of the UK economy. That would be the main concern I think a lot of people factor in. I think there's also probably, I think, a concern about our shorter leases as well that's linked to that population. There's a much more fragility around a shorter lease.
Although again, I'd say actually most leasing done these days has much shorter period or break periods in it anyway. I think it's probably not something that actually is that relevant. I guess outside that is probably a concern that actually our property portfolio is not a central London property portfolio. It's a much broader spread. We've got different quality of assets in different locations across London and in the Southeast. I think that's an asset because actually we can actually target varying levels of pricing across our portfolio for different types of SMEs. I think all of those things don't help to sell the story because they're different to what the story has sold for other traditional property companies.
In some ways, I'm saying this in sort of saying what's an advantage as well, is we don't have a comparable peer. You know, we are, you know, very much a benchmark of one in terms of what we do in our model. That is true in terms of the competition across London. We have a very fragmented competition in terms of customers that compete with us. They're very much a local play generally when we're launching a building in a location across London.
Thank you. Just two quick questions, maybe one each for Leo and Dave on the financing side first. The bank debt that you have, if you were to refinance that maybe to medium-term debt, what would be the all-in cost for that? For Leo, I like the presentation on slide 37, I think it was, about the EPC. Just a quick question around that. You know, is there any rule of thumb as we're looking at it? We're not close to it like you are. Is there a rule of thumb to what it would cost typically to move it from a C to a B or a D to a C?
What are the typical types of things that you're doing for moving it from one band to the other band, please?
All right. Dave,
I'll go first, right? Give Leo a bit of thinking time.
Yeah, in terms of our overall debt, I think we're in a good place at the moment. Obviously, the first thing was agreeing the amendments to the facilities that we need off the back of the McKay transaction. That's now done. I mean, we haven't got any sort of immediate maturities. The nearest one is the acquisition facility, but actually we've got sufficient facilities to cover that and all of the committed expenditure actually. There's no sort of immediate need for refinancing in the short term.
I think in terms of if we were to go and issue debt now, I mean, I don't think we are at the moment, obviously. The markets have been, you know, hugely volatile, and prices both in terms of gilts, yields have both moved out very significantly over the last, you know, six months. You know, I think we've talked a little bit about the market around property sales, but I think also in terms of the debt capital markets, things seem to be starting to feel a bit more stable. So I think we'll see where pricing moves over the next, you know, few months. Although there's no immediate need.
I think as the market stabilizes, you know, we've both you know in terms of our existing debt, we've got both public and private debt, so we've got a range of options open to us when we do go to market.
The green bond was at 2.3%. I mean, I don't think we'll be issuing a 2.3%. I'd love to, but I don't think that'll be happening anytime soon. Yeah, the private placements are more sort of 3-3.5%. If you look at where we've issued historically. I mean, you know, prior to that, we probably had a private placement just about 5.5%. You know, if you look over, you know, long-term history, that sort of 4%-5% range is probably more typical of where, you know, triple B debt would have been on a historic basis. You know, that's not a guide as to where market's gonna go, just looking backwards.
Yeah.
To answer your questions on EPC. We had a sustainability Capital Markets Day earlier in the summer, so the presentation might be quite helpful in that regard. But ultimately, setting out an estimate of around GBP 40 million-GBP 55 million for the portfolio as a whole. Clearly, we've incurred some of that this year, and some of it we'll address with our refurbishment pipeline. The kind of things that we're doing are driving at two things. Firstly, the EPC side of things. This is why we differentiated in the presentation, because we think that there's an EPC and regulatory lens to sustainability, which doesn't always pick up the operational use of the building. It's more of a theoretical starting point.
In order to get to that EPC point, key things that we could and are doing are installing LED lights rather than halogens, removing wet gas-fired wet radiators and putting in VRF refrigerant air conditioning off a heat pump highly efficient system. It's also an investment when it comes to the operational performance, which is, you know, less about the EPC and much more about the energy use intensity, and it's, you know, one of the things that we think sets us aside investing in that kind of smart monitoring system. The team that we have, both on site and within you know our central resource, is analyzing this data on a daily, monthly, you know, can be hourly basis for our tenants, our customers, our base build and our common parts.
From both an operational perspective and an EPC perspective, you're sort of wrapping them together. One of the things that and lastly on your question, I think it's quite hard to split out what is an investment in kind of financial outcome and what's an investment in ESG. That's one of the things that we think is really advantageous for us and we really benefit from, is that when we're undertaking these, they sort of go hand in glove.
Yeah. Thank you.
I guess one comment I would make is that it is quite encouraging the fact that you've got some of these older buildings and you're able to achieve EPC ratings. I know they're theoretical.
They are, you know, the ones that you highlighted, at least they're in the Bs and Cs.
These are very good, and it's encouraging that you're able to do that with other buildings as well. Thank you.
Yeah.
All right. Kieran, yeah.
Hi, Kieran Lee at Berenberg. Just a very quick one on sort of flexibility and quality. They're buzzwords across sort of the whole office sector for what the tenants are after. If we look at your portfolio and what's happening with the demand viewings, down a clip and how some of your peers are expanding into flexible workspace.
How are you finding your market share? Are you looking to grow that? Are you growing it? Are you facing more competition from traditional landlords moving into this space? Then sort of as a follow-up is how defendable do you think the flexible premium is for office space on a long-term view? Is it going to become an expectation, not a price premium point?
Right. I guess on the first point is really going back to what I said earlier, is that, you know, in some ways, the word flexibility and the players in that market, it's almost like there's confusion now 'cause flexibility is such a generic term, and it covers so many different types of offer that actually what most of them, I think you're describing in terms of offer, is very much more what I mentioned earlier, which is a fitted out furnished offer, which is typical of the service office players. While, I mean, I suppose there are opportunities in our portfolio to provide fitted out space, but it's limited.
Generally, as I said earlier, what our customers want is a blank canvas for them to actually fit out and create their own identity. Often it's not for a traditional office use. Actually, most of those other players, the quoted names that you're referring to, don't play in that market. That's both in terms of customer and also in the locations. 'Cause when I'm talking about the locations, I'm talking about that broader London opportunity. Whether it's in Hackney, Deptford, Wood Green, even on the South Bank, as you come towards where we're based in Kennington, there are no other real players in the flex space there. The reason is because actually there's no market for that service offering. It's very much more concentrated in the more central London locations.
Yes, we do have some buildings there, but actually our offer, you know, stands alongside those. What we find actually, and you know, a good example would be our building in Shoreditch, The Frames, is that we work next door, and actually they're a great source of customers for us. 'Cause actually as customers grow and they want to create their own identity, they come into our building. Actually we love being surrounded by some of these other players 'cause actually they're the source of customers for us as they grow and mature. It's, and I'm hesitating to say it because it does sound very arrogant that we don't have any direct competition, but they are really a very distinct type, different type of product. Your second question around pricing.
I always sort of hesitate on this because I don't really think we've priced the market. We don't really look to get a premium over anyone else, comparison. I mean, we price to where we see demand in the market. We know that actually, you know, every day we'll do lettings. If we've got the wrong price, we won't be doing any lettings. Ours is much more driven by the day-to-day market that's out in any location, whether it's on Bankside, whether it's in South, West, East London. Our market in terms of premium is, I've never perceived as having a premium. I just know that actually, if I'm doing lots of lettings, and occupancy is rising, great. If occupancy gets too high, that probably means, actually, I can push pricing up.
It is really a dynamic pricing model is what we operate, and we're very much mark-to-market, pretty much, you know, month to month, week to week. Okay?
Morning. It's James Carswell from Peel Hunt. Just a quick one, kind of, capital allocation, and you obviously got disposals planned. You talked this morning about the development pipeline.
Yeah.
refurbishment pipeline, and the attractive returns. I think it's slide 42, though, you've got some future acquisition opportunities.
You know, in terms of that bridge back in terms of the rents.
Yeah.
I guess I'm just wondering, you know, at what point would you consider a capital return to shareholders rather than those acquisitions? I appreciate it's not a decision to be made today.
Yeah.
You've gotta get to it.
Yeah, I mean, I think in terms of capital recycling, at the moment our focus is very much on proceeding with our disposal program. I think, yeah, in terms of where the share price is, whether we'd look to return cash rather than buy, I think that's always gonna be a consideration. As much as I did say, you know, we are obviously looking out at acquisitions at the moment, I think we'd think long and hard at the moment, given where the share price is, as you say. I would want to preserve cash to actually move my gearing down on the balance sheet at the moment. I think that's probably a question for when we've got our balance sheet in a better sort of place in terms of LTV, because you know, as we've said, medium-term, we wanna get LTV down below 30%.
That would always be our medium-term aim. Okay, if there's no more questions. Have we got one more question? Chris.
Thank you. Chris Spearing from Liberum. Sorry, just a couple of questions around McKay, and just a couple of the numbers, please, Graham.
Yeah.
Just looking at slide 14, there's a GBP 14 million valuation uplift and a GBP 1 million gain on sales versus the purchase price. Forgive me, I haven't got my calculator. I think that's sort of 6-7p a share.
On the previous sort of earlier slide 12, there's a 19p impact on NTA for shares issued. Is the right way to kind of think about the impact so far, to sort of look at the gain on the revaluation of the assets, less the impact of issuing those shares to a sort of a net dilution of about 12-13 pence?
Yeah. That's certainly the right way to think about it. In terms of the net dilution, you're probably in broadly the right ballpark, I think, yeah. I mean.
That's good, that's good for me, Dave, I'll say that.
Yeah. Yeah.
What you haven't got there is actually uplift in income generation from actually the cutting of the cost base in McKay that hopefully will flow through into the second half of the year.
Thank you.
Okay. Have we finished here then? Just turning over to the conference call, is there any questions on the conference call?
Thank you. Just a reminder for participants on the conference call. If you wish to ask a question, please press star followed by one on your telephone keypad. If you change your mind and wish to remove your question, please press star followed by two. When preparing to ask a question, please ensure that your phone is unmuted locally. To confirm, that's star followed by one to ask a question. The first question comes from Paul May from Barclays. Please proceed with your question, Paul.
Hi team.
Yeah.
Pleasure to be there. Just a couple from me. Firstly, should be quite quick one. What proportion of your space is actually traditional office space? You keep mentioning obviously other space usage, but there is still quite a bit that is traditional office. So I just wondered what proportion that is.
Right. I mean, I knew I'd get called out with this question. Yeah, I. What I would say is that we've done a sort of a fairly high level review, and I'd say about half of the portfolio has customers that don't use their space as offices, i.e. desks and chairs. When I would say, I would say about 50%. The other 50% have offices and chairs, but actually if you look at the pictures of the advertising, the marketing companies that we've got, they without being rude about more traditional companies, I mean, they use their space in a much more creative way. It may be half the space has got desks and chairs. They'll have a lounge area. They'll maybe have a breakout space with pinball machines, storing their bikes.
A very much more creative ways of using their space. Usually, you know, it is something that they're really wanting to create a destination for their staff to come to. In answer to your question, Paul, about 50% would be traditional office use, but it won't be traditional office as you would see in, say, the City, where row upon row upon desks.
Cool. Great. Thanks. Just also on the buying back that you mentioned, have you considered buying back your bonds or tendering those? I think yield to maturity is currently about 8.4%, which seems obviously quite excessive given, as you mentioned, you should be able to reissue debt at lower levels than that. But just wondering whether you had thought about buying back those bonds, obviously at the current discounted prices. That was a pretty useful counsel.
I mean, I would just echo, you know, exactly what Graham said on in terms of the share buyback really. I mean, our focus very much at the moment is on reducing leverage, getting it back down to the low 30%. You know, we will continue to look at, you know, refining our financing options as markets move. Paul, as you say, nothing is off the table. No, the focus really at the moment is on that disposals program and reducing leverage.
Just on that then, just to link to that, obviously the asset values are going to be up significantly in the first half given the rental growth that you were able to push through. I think around sort of mentioning values coming down and expecting values to fall further from here. Is that your expectation, particularly given the economic outlook? Or do you believe that the Workspace portfolio will be more resilient than the wider market?
I mean, again, I'm more confident about focusing on the operational performance. I think valuations, obviously, there's lots of other dynamics there. Certainly I would feel there's plenty of room for us to be pushing our ERV numbers forward. Both on the existing like-for-like and also as we let out improve the pricing on our new space that we're launching into the market. Whether that offsets yield movement in the near term, I wouldn't want to commit on that. I would hope it mitigates a fair chunk of any risk around that yield movement. Time will tell.
I mean, I think the good news from my perspective is operationally, we're in a very good position in terms of headroom, in terms of if valuations do move out, you know, we've got plenty of headroom, as Dave highlighted around, you know, banking covenants and everything else. Yeah, I would like to think that actually, our valuation should be relatively stable because of the opportunity we've got to push pricing. I mean, I might regret saying that in six months' time.
If only we all had a crystal ball. Sorry, just on that last one. Your tenants then obviously mentioned the economic decline. You're quite exposed to that in the past when you have been. How does energy pricing work? Just remind me within your assets. Is that included in the rental levels?
Yeah, I mean.
is tenants have to pay that on top?
No. I mean, for about 85% of our customers take advantage of the Workspace energy offer, whether we charge it either separate, but actually increasingly we're using it inclusively within the billing. It's one bill that they pay. For all of those customers that take the Workspace energy, they benefit from pretty much a flat energy cost from 2021 when Dave put the hedging in place through to 2024. They are gonna benefit from no real increase in energy costs over the coming year, two years.
Thanks very much.
Okay.
Thank you. At this time, we have no further questions on the phone lines. If I may hand over to Graham Clemett for questions on the webcast. Thank you.
Okay. Webcast. Duncan, would you like to give me a question?
Yes. We have a couple of questions coming from the webcast. The first is from Rob Platts from NFU, who just wondered on October leasing being lower, more like the quieter summer months, whether you put that down to short-term political uncertainty or indication of customer demand waning. Would be good to hear what you're hearing from prospective tenants.
Leo.
Sure. I think there's undeniably some uncertainty in there. There's been a bit of wait and see, particularly after the Mini-Budget. Ultimately, I don't think it's that different from the story we've had over the half year, whereby we've had slightly lower inquiries and viewing volumes, but we've had a much higher value of conversion rate. That's something that we're seeing going into the second half of the year. We're still seeing a high value of conversion, good letting activity, good pricing movement. It's just coming off a, you know, higher numerator, lower numerator in terms of the viewings and inquiries. I think that's partly economic, it's partly down to our marketing campaign and better brand awareness, partly down to a better awareness of the offer that Workspace has for potential customers.
I would echo and add nothing as we've highlighted, you know, today that would suggest anything other than a continuing strong level of demand across our portfolio.
One more question from Steven Ackerman from Castellain. What is your weighted average unexpired lease term?
Your WALT. Rand asked me that last time, and I still don't know it. I mean, the reality is it's really not a number we ever look at. I think we'll have to apologize and come back with it. I mean, we will get someone to calculate it. If you'd like to guess, Dave.
Well, I won't guess. What I will say, I mean, no, I could guess, but I won't. What I will say, I mean, we put a slide, I think, in the year-end presentation, which shows that by value, about half of our leases are on our normal 2-year lease, which has got a 6-month rolling break in it. About half are longer term, more traditional 3- or 5-year leases. There is very much a mix in there. It really depends on whether you count it from 6 months rolling break, whether you count it from 2 years, and whether you count it from, you know. You can count it in lots of different ways. It will undoubtedly be less than a more traditional office landlord.
I guess the key point really isn't about what the WALT is. It's about how sticky our customers are. The majority of our customers stay with us those 5 years. You know, we have a really strong retention rate. That's from all the things we've talked about in terms of investing in the portfolio, the fact that it is their home, that they invest in their unit. You know, they want to be there. The fact they don't have to leave because they can flex the size of their space. They can increase the size of their space if they need to at short notice. They can move within the portfolio. We've got, you know, 5 million sq ft in London. They've got plenty of opportunity to do that.
The stickiness is far more important than the WALT.
Having said that, we will come back and provide the detail.
No further questions from the web.
Okay. Well, I guess for a number of you, it's been quite a long morning. Thank you for your time this morning, both here and online for those joining remotely, and hopefully see you soon. Thank you.
Presentation has now ended.