Final Results - Year Ended 31 March 2000, Part 1

Workspace Group PLC
26 June 2000

Part 1
               ANOTHER RECORD YEAR FOR WORKSPACE AS DEMAND FROM
                              SME's REMAINS HIGH
                                       
Workspace Group PLC ('Workspace'), today announces its preliminary results for
the  financial  year ended 31 March 2000.  Workspace provides approximately  6
million  sq.ft  of  flexible business accommodation to over  3,000  small  and
medium size enterprises ('SMEs') in London, the South East and the Midlands.

 *   Profit before tax on trading activities up 19.5% to £8.3 million 
     (1999: £7.0 million)
 *   Annual rent roll at year end up 48.9% to £25.9 million
 *   Turnover up 28.9% to £29.3 million (1999: £22.7 million)
 *   Earnings per share on trading activities up 20.4% to 40.2p (1999: 33.4p)
 *   Ordinary dividend up 10.5% to 21p (1999: 19p)
 *   Net asset value per share up 32.4% to £9.04 (1999: £6.83)

Commenting on the results, Harry Platt, Chief Executive, said

'   This  is  another  excellent set of results. Over  the  last  five  years,
Workspace  has shown compound growth in earnings per share of 15.5% per  annum
and in net asset value of 22.1% pa.

'   The  small business sector is buzzing and we have a huge market  place  in
which  to  expand. There are 1.2 million small businesses employing up  to  50
people,  making up a vibrant and resilient market.  Demand for good value  yet
high  quality space for small business remains buoyant.  We offer  a  customer
focused  product  with a mix of service provision that enhances  our  earnings
potential.

'   The £75 million Tonex portfolio has proven to be an excellent purchase. We
are now the dominant provider of accommodation for SME's in London.  There  is
a  lot of scope to extract further value from our properties by continuing  to
improve rents and occupancy levels.

'  The Group's portfolio is located in sought after locations with good growth
prospects.  We continue to explore opportunities to create further value  from
our   sites.   In  particular,  we  are  seeing  increasing  demand  and  more
opportunities to offer a mix of live-work schemes.  These appeal  particularly
to the young, entrepreneurial new economy generation.'


For further information:

Harry Platt, Chief Executive                      Jonathon Gillen
Mark Taylor, Finance Director                     Simon Courtenay
Workspace Group PLC                               City Profile Group
020-7247-7614                                     020-7726-8588

e-mail: [e-mail]                 e-mail:[e-mail]
web: www.workspacegroup.co.uk


Chairman's Statement

This  has  been another year of significant  progress by Workspace  Group.  It
has  again delivered  an  excellent  performance  in its profits, earnings and
net asset   value   growth   and  in  share  price  performance.   The   Group
continues   to   demonstrate   its   ability   to add value through its active
management.

My  first  year  as chairman saw strong growth  from   our   portfolio.   Over
the last five years our earnings per share has increased by 105.9%, a compound
annual  growth  of  15.5%  and  our  net  asset  value  per share by 170.9%, a
compound  annual  growth of 22.1%.  This  performance  is  amongst the best in
the  sector  and  has  been  driven  by  the  Group's longstanding strategy of
providing  workspace  for  the   small   and  medium sized enterprises  (SMEs)
market, actively  managing our properties, adding  value  to our offering  and
concentrating on London and the South East.

Results

The  Group  has this  year produced another set of  record financial  results.
Rental income during  1999/2000 was £23.4  million, up  28.5% on the  previous
year, whilst turnover was  up 28.9% to  £29.3  million.  These increases  were
attributable  to  both  rental  growth  and  the  contribution  from the Tonex
portfolio  reported  on below.   Profits  before  tax  from trading operations
increased by 19.5% to £8.3 million and earnings per  share by  20.4%  to  40.2
pence.   The  value  of  the  Group's   portfolio increased by £118.3  million
or 63.6%.  Of this  £87.1  million  arose from new  net investment  and  £31.2
million  from  increases on  revaluation.  This   has   been  reflected  in an
increase of 32.4% in net asset value  per share to £9.04.

Comparing your company to the external yardstick  of  the Investment  Property
Databank  (IPD)  shows  an  ungeared  total  return for our portfolio of 24.9%
against the   IPD   All-Fund  performance  of  15.2%.  This outperformance  is
a consistent  feature  whether   measured  over  one,  three  or   five  years
reflecting the long term  benefits of the Group's active management approach.

Highlights of the Year

This  has  been  an  exciting  year.   In July 1999 we completed  the purchase
of  the  Tonex  portfolio  of  twenty three  estates  for  a consideration  of
£74.7  million,  enlarging   our    portfolio   by  40%.   Details   of   this
acquisition  were included in  a circular to  shareholders last  June.  Twenty
one of the properties are in  London, our  main  area of operation, the others
being in the South East and  the  Midlands where we already have a significant
presence.  This  portfolio  plays  to  our  strengths not just in   terms   of
location  but  in  the  rental growth opportunities  available to  our   style
of   active management.   The average estimated rental value  at  the time  of
acquisition was £4.82 per square foot  compared with an average  of £8.54  per
sq. ft  for  our  similar  types of  property.   The management team has   set
about  the   challenge  with   some  relish. Some  disposals  have  been made,
development   and   improvement   opportunities identified  and rents uplifted
by 31 pence per sq.  ft  by the  year end.  This was  an excellent acquisition
and one  that   will  provide  significant  benefits to  shareholders for some
years to come.

770 lettings were achieved in the year  Of these two are exceptional.  Firstly
the whole  of  1-10  Union  Street, Southwark, was  let  to J Sainsbury for  a
rental  of   £2 million   per  annum,  subject  to  completion   of  a   major
refurbishment.  Secondly, the  whole  of  the  office  space  at the  recently
refurbished and extended Ensign Court on the fringe  of   the  City of  London
was  let   to   News International, taking the total rent of this property  to
£411,000  per  annum compared with £95,000 prior  to  its  refurbishment. Both
of these major lettings are a  direct result  of the broad  vision the Company
brings to  making  the  best   use   of  its portfolio.  I am  confident  that
further added-value opportunities will be created in  the future.

Dividend

A  final  dividend  of  15p, making 21p  for  the  year,  an increase of 10.5%
over last year, is recommended  by  the Board.   This  is in keeping with  its
policy of increasing the  dividend  by a margin above the rate  of  inflation.
Dividends  are  covered  1.91 times by  post tax  operating profits, excluding
other items.

Board and staff

I  was  delighted to be  invited  by  the  Board  to   succeed  Alan Porter as
Chairman on  his  retirement  last September. Alan  led  the company  from its
formation in 1987, taking it from its small innovative beginnings to being one
of  the leaders in our sector.  He left with our thanks  and  best wishes  for
what will no doubt be a long and very  active retirement.   I  have served  as
a non-executive  director since  1992  and  my  role as  Chairman  will  be  a
non-executive  one.   As a  result,  Harry Platt  became  Chief Executive   on
1  October  last year.  I  am  pleased   to  welcome  Dr  Christopher Pieroni,
of  property  advisers Colliers   Conrad  Ritblat  Erdman, as a  non-executive
director of the Company.

Shareholders  will  be  aware  from  previous   reports  that  the  success of
Workspace   Group  is  very  much  due  to  the  efforts  of  the  whole team.
This has   been   strengthened  since  the  Tonex purchase and our new members
have  been rapidly  integrated into  the  business  and  in  turn have brought
 with  them  fresh  ideas.  My thanks go to everyone -  staff  and Board - for
their efforts during  what  has been a year of substantial progress.

Prospects

Workspace  Group  has   always  concentrated  on   providing accommodation and
services for the small  and medium sized enterprises  market.   There are some
1.2  million  SMEs employing   up  to  50 people and they are  a  vibrant  and
resilient group. They represent a very large market,  one that  is dynamic and
growing.  Meeting the needs of  this market   requires   an  equally   dynamic
company  for consistent  success  - and  workspace  Group  has achieved that.

We  have an  increasingly  dominant  position in London, the area  of greatest
growth for our market, and our offering  is  clearly relevant to today's SMEs.
It is particularly pleasing  to note  how  many of our newer tenants are  part
of  the  new economy. By continuing  to focus on  the  SME market,  extracting
best value from our portfolio  either from the reversionary rental opportunity
that exists,  or from  development  and  alternative  use potential, we  shall
continue to add value for our shareholders.

Our  progress  has continued into  the  new   year.  There  remains  excellent
scope  for  both   rental  and  capital growth   from   our  portfolio.   Your
Company   remains ambitious  and continues  to   seek opportunities to  expand
its property and tenant base.

Operating Review - Adding Value

'   Demand for the Group's product remains strong  - its principal   operating
locations  vibrant  -    promising  continued  growth  in  rent,  earnings and
assets.  With much of its portfolio in  improving  locations there continue to
be opportunities for the Group to secure added value from the  alternative use
and refurbishment of  many  of  its properties.' Harry Platt, Chief Executive.

Key Events

Three  major  events  in  the  year  stand out: the  acquisition of  the Tonex
portfolio  in July 1999; the related  financing  of  this transaction  and the
letting of 1-10 Union Street to J Sainsbury.

In  July  1999  the  Group acquired  a  portfolio  of  23 estates  (the  Tonex
portfolio)  with  over  800  lettable  units  and  a floor  area  of  almost 2
million sq. ft, for  £74.7  million.  Linked  with  the  acquisition  was  the
deferred  purchase in  January 2001, following  settlement  of  a rent review,
of a further property in London for  a consideration  of  £6.5 million plus an
overage  payment based upon the rent to be settled on review at that time.

The  portfolio fits well with the Group's holdings.  The properties and  their
use  are  similar   to  the   Group's  existing   portfolio, namely  multi-let
properties occupied  principally by small to medium-sized enterprises  (SMEs).
Twenty one of the estates are located in London. Over 40% of the portfolio, by
value, is located in central London, much  of  this being near to the route of
the new Jubilee Line  extension  in areas likely to see  economic  uplift over
the   immediate   future.  Overall,  the  acquisition  improved  the   Group's
penetration of the key London market and  it  now  holds the largest portfolio
of  workspace properties let to SMEs in London.

The  acquisition  offered  particular  scope  for  adding  value  both through
improvement of rental levels at certain properties  and  selective   disposals
of  others.    The  average  rental of the portfolio at acquisition was  £4.13
per  sq. ft compared with an  Estimated Rental Value (ERV) at  that  stage  of
 £4.82 per sq. ft  and  a   comparable  average value for Workspace's existing
similar estates of £8.54 per sq. ft.  By  31  March 2000 the average rental of
retained properties  had  increased to £4.44 per sq. ft, an uplift  on a like-
for-like basis of 8.6% over the  eight  months  of ownership, with the average
ERV increasing  by 10.8% to £5.47 per sq. ft. leaving more to  go for. At  the
same  time  four  properties regarded as having  limited growth  potential, or
where there was substantially better  alternative  use potential together with
some vacant  land, were  sold  for £3.93  million,  yielding  20.8%  over  the
aggregate purchase cost of these properties.  At 31 March 2000  the  remaining
acquired properties were  valued  at £82.1  million by Insignia Richard Ellis,
an  uplift  of 8.5% over the book cost of these properties.

The purchase of the Tonex portfolio was financed  entirely  by  debt.   At the
same  time  part of  the  Group's existing loan  facilities  were  refinanced.
This  enabled   the construction  of  a  £122m facility in anticipation  of  a
refinancing  via a commercial paper programme, which  in turn it  is  proposed
will be covered by  a  bond  issue. This  route  was  selected  by the company
since it  offered  the  key  advantage of certainty of availability of finance
to   complete  the purchase  without  diluting existing shareholders'  equity.
Use   of  the   securitisation   route  provided  other  advantages   in  loan
covenants  and  other terms, whilst providing a further platform for financing
the  Group's activities  in the  future.  Full  details  of  the financing are
included in the Financial Review.

The third landmark event of the  year was the letting of 1-10  Union Street to
J  Sainsbury. This  vacant  former Royal Mail sorting  office  was  originally
acquired in April 1998  with  the  intention of refurbishing it  and  creating
a further  business  centre  in  Southwark  following   the Group's    success
with   the   nearby   Leathermarket.  Recognising  the  improving  fortunes of
the  area  and  in  parallel  with  negotiations  of  the  necessary  planning
approvals  for the development of a business  centre, the  property  was  also
marketed  for  sole  occupancy.    J Sainsbury agreed  to take the property on
a 15 year lease at  an initial rental of £2 million per annum, subject to  the
completion  of   certain  refurbishment  works.   An agreement  for  lease was
exchanged   in  September  1999.  Fuller  details  of  the letting to and  the
development agreement with J Sainsbury and of the  project finance package are
given  later. The  Group's  ambitions  for  a   new  business  centre  in  the
Southwark area  were  fulfilled  by  the acquisition  of the  Great  Guildford
Business Centre as part of the Tonex acquisition.

Our Market Place

We focus our activities on London, the South East and the Midlands  where  60%
of  the UK's 1.2  million  small  and  medium-sized   enterprises  (SMEs)  are
based  and  where business is forecast to continue to grow.

Since  we  currently accommodate almost  3,000  of  these 650,000  businesses,
it is clear that there  is  enormous potential for Workspace Group to continue
to  acquire  more  properties and  tenants  without even beginning to approach
saturation  point.  Our new  customers   are  often  people  looking  to  move
from  a  back  room  environment  to  more formal  business premises.  Many of
them will,  in  time, relocate  within our portfolio as their need  for  space
increases.    Churn - the  formation,  expansion,  reduction  and   closure of
business - is  an  important aspect  of   the  SME  market:  it  provides  new
tenants, relocates  others,  and  creates a continuing opportunity to increase
rents. Our  property  management  operations  -  letting,  estate  management,
credit  control -  are  all  undertaken  in-house  and   are  attuned  to  the
flexibility needed in  this  market  place.  This  enables  us to foster close
contact  with   our  tenants,  to  monitor  changes  in  the  market,  and  to
maintain exacting standards. We try to work  closely   with  our  tenants;  to
understand  and  be  responsive  to  their  needs. This  is  reflected  in our
flexible leasing approach and through a combination of focus groups, entry and
exit interviews and active centre management.

In  many of the locations  in  which  the  Group  operates the introduction of
competing workspace is constrained either by   low  rental  values  which  are
unable  to  support development or by high alternative use values for land.

During  the year under review 3,858  enquiries  for  space  were  received  in
London and  807  in  the  Midlands.   The  principal  generators of enquiries
continued  to  be  estate  signboards  and  referrals  from  existing tenants.
Following  the   Tonex  portfolio  acquisition   nd  the  rebranding  of  the 
properties, an  immediate uplift in  enquiry  levels  was  noted in the London
region.  These enquiries  are  valuable not  only  as a source of lettings but
also as indicators  of  levels of  activity within the SME sector and industry
sub-sectors, essential for the effective adjustment  of the  Group's  offering
to  current  and  emerging  demand  areas.  By  operating  in the economically
 vigorous  SME  market   and   continuously   monitoring   both   its   tenant
profile  and that of its enquirers the Group  is   able   to  target  emerging
'value-adding' businesses -  those  best able to pay improving rents.

Occupancy, turnover and rent

Occupancy  of core properties (those held throughout  the year and not subject
to redevelopment) remained steady at  around  92%, which  the Group regards as
effective  full  occupancy.  Low  vacancy  rates  and  continuing high  levels
of  enquiries  have  aided rental review  programmes  and  improved rentals on
re-lettings (approximately 40% of the Group's  portfolio  is subject to rental
review  or  re-letting each year).

With   the   progress   in   letting  up   space   at  properties  subject  to
development,  principally  Ensign  Court,  the  overall  occupancy  levels  in
London and  the  South  East  improved  from  85.1% to 86.1%. Occupancy levels
in  the Midlands also  improved  from 93.0% to 94.2% with those  on the  Tonex
portfolio remaining at  85% (the  level  at  the time  of  acquisition).  This
latter statistic  disguises  the   real  level  of   activity at  these  newly
acquired  properties  where  as  a  result of tenant churn  not only  has  the
quality  of the income stream improved but  also  an uplift of 8.6% (on a like
for like basis)  in  rentals  was   achieved over  the  eight   months   since
acquisition.

Rents  have again increased strongly throughout  the year. Average  rentals of
the core portfolio held at  31 March 2000  increased by 8.3% (1999: 5%) during
the  year,  from  £6.00  per  sq.  ft   to   £6.50. The   principal  increases
continued  to be in London and  the South East  where  the  average  rent  per
sq.  ft  of  the  core  portfolio  rose   by  12.5% (1999: 5.5%) from £6.87 to
£7.73.  The rolling rent  review  and lease renewal programme continued and in
1999/2000  impacted  on 13.4% of the opening rent roll.  The  uplift  achieved
during  the year  of  £0.47  million  on  reviews  and  renewals represents  a
20.0%  increase  on  previous  passing  levels.   High  levels  of  occupancy,
improvements in average rent and the increase in size  of  the  portfolio have
all contributed to the 28.9% increase in turnover during the year.

Local market presence, attentive in-house management  and  constant monitoring
of occupancy and rental income  gives  the Group an unparalleled understanding
of its market.

Acquisitions and Disposals
 
During  the year  the  Group  invested  £77.0 million in  new  properties. The
majority of this was in the £74.7 million acquisition  of the Tonex portfolio.
The remaining  £2.3  million  was invested in the Sugarhouse Business  Centre,
the  Shaftesbury Business Centre and in a small  plot  of land  at Brook Road,
Redhill. All these properties are  adjacent  to existing investment properties
held  by  the roup (3 Mills  Studios,  Pall  Mall  Deposit  and   Hooley  Lane
respectively).

The Tonex acquisition  represented  a  major opportunity for  the  Group.  The
portfolio was well known to the Company, having  monitored its performance and
progress  for  some  time.  With its strong London and South East presence and
focus  on short term  lettings  to SMEs, the properties  and  their  use  were
 closely allied  to  the  Group's  existing  holdings.  Our  knowledge  of the
market and  the  portfolio  greatly  reduced  the  customary  risk  associated
with such a  large  acquisition  and  enabled  us  to  move  quickly  when  it
became  available. This acquisition  followed  the  pattern  of  a  number  of
 previous  acquisitions  where  vendors seeking  an off-market sale recognised
Workspace  Group's ability to assess and complete transactions quickly.

The  Tonex properties  themselves,  whilst generally  sound and  located well,
had not been improved to the  standard  operated  elsewhere within the Group's
portfolio.   They  offer  considerable   scope   for  improvement  through   a
rolling  programme  which will add  considerably  to  the  reversionary rental
potential of the portfolio.

During the  year  six  properties  together  with  a  parcel  of land  at  one
further property were  sold.   Two  of  the  sales, Westgate and  Malham Road,
were properties held at 31 March 1999 but which had limited growth  potential.
These were sold for an aggregate sum of £1.51 million and  an  excess of £0.10
million (7.1%) over valuation  at  31 March  1999.   The other four properties
and land   parcel  were   part   of  the  Tonex  portfolio  and  realised   an
aggregate  sum  of  £3.93 million,  an   excess  of  £0.67  million 20.8% over
cost.

The  Group  has identified a number of other sites  where  there  is potential
for  added  value  through   conversion  to  residential/live-work, retail  or
leisure uses  and  where  disposals in due  course might occur. In addition to
these  potential   opportunities   there   are   a   number   of opportunities
to  add value  by  extending,  upgrading  or  converting  existing  properties
to  produce  additional  workspace for letting to SMEs.  Through these schemes
and the recycling of capital released  on  disposals, the Group  is   able  to
 enhance  shareholders'  interests  without recourse to new capital.

In  July  1999  a fire  completely  destroyed  the  Group's  property at Ferry
Lane, Rainham. Subsequently the Group's  claim  was  settled with  insurers at
£1.55 million.   The property was valued at £0.94 million at 31 March 1999 and
the  cleared  site  at £0.45 million at  31  March  2000. Allowing  for  costs
of clearing the  site  and  settling  compensation with existing tenants a sum
of £0.66 million has been taken to profit.

Shortly  after  the  year  end  the  Group  announced  a   joint venture  with
Copthorn Homes for the development of  some  vacant  land  for residential use
at its 3  Mills  Studio property.  Negligible value is attributed to this land
in the  Group's  books.   The Group holds   other   properties  where  similar
schemes  are  possible.  In  most  cases  these  opportunities can be realised
without significant erosion of  the   Group's  core  activity   of   provision
of  accommodation    to  SME's  and,   through  partnering  or  outright sale,
without taking development risks.

Acquisitions during the year were made at a net aggregate  yield of 9.16% with
disposals at 8.34%.

ACQUISITIONS IN 1999-2000
                              Description                Purchase    Initial
                                                            Price     Annual
                                                                      Income
                                                                £          £
Sugarhouse                    Freehold                               
Business  Centre,             (23,118 sq. ft 20 units)            
Stratford, London             Business centre             385,000     45,112
E15               
                                                         
Tonex  Portfolio,             Mainly freehold                        
mainly London                 23 estates (792                    
                              units, 1,881,302         74,700,000  6,807,754
                              sq. ft)                  
                                                         
Brook Road,                   Land adjacent to            250,000     20,000
Redhill                       existing storage
                              land holding
                                                         
Shaftesbury                   Freehold (11,012                    
Business  Centre,             sq. ft 30 Unit            1,700,000    180,800
North Kensington              business centre)          
London W10

Disposals in 1999/2000

                                                       Disposal   Exit Annual
                                                          Price        Income
                                                              £             £
Westgate Business Centre,                               410,000        57,373
London E8
                                                         
Malham Road Industrial state,                         1,100,000       106,000
London SE23
                                                         
*Tysoe Studios,  London EC1                           1,330,000        81,030
                                                         
*Church Road Studios, London                            425,000        51,835
E12
                                                         
*Cape House (Front and Rear)                          1,100,000        70,000
London E14
                                                         
*St Anne's Trading Estate,                              900,000        87,316
London E14
                                                         
*Land at Westminster Business                           175,000             -
Square, London SE1
                                                         
                                                         
*These properties were purchased as part of the Tonex portfolio

In  addition notice under an  option  was  served before the year  end  by the
tenant for the purchase of South  Block,  Westminster Business Square, London,
SE1.  This sale  was completed on 19 April 2000 for £1,235,000, at which  time
a  further option agreement was entered into for the sale (at a  consideration
of £500,000) of  some  vacant  land adjacent to the property. 

Development and refurbishment

The  Group's  core activity  is  investment in  and  letting  of   small  unit
accommodation.  As such it is not a  property  development  company  but  will
from time to time  engage  in  development  activities  to improve the quality
of the assets it holds, and hence the return from these assets.

During  1999 the Group had five major projects in  progress, with a  number of
smaller initiatives at  other  properties.  The major projects, in  which £8.9
million was invested during the year were at 1-10 Union Street,  Ensign Court,
Kingsland Viaduct, Helix Business Park  (Surrey Heath) and 3 Mills Studios.

The   £11  million   refurbishment  of  1-10  Union   Street   is   the   most
significant  project  in  progress presently. To  expedite  completion of  the
development,  management  responsibilities  have  been  passed  through  to  J
Sainsbury  under  a  development   agreement  which  also   caps  the  Group's
financial  liability.  Through  this  and  the  fixed  rent start date  of  31
March  2001  most of  the risks  associated  with  development  activity  have
been  covered.   In  addition   to  the £11 million  building refurbishment  J
Sainsbury  will  invest  approximately  £9.5 million  in  th e  fit-out  works
prior to taking occupation  of the  building.  The   works  were commenced  in
September   1999   and   should   be  completed,  with   J  Sainsbury   taking
occupation, by September 2000.

Alongside  the  agreement   for  lease  and  development   agreement   with  J
Sainsbury  a  project  finance  package, secured  solely against the  property
and  the  agreement  for   lease, was  negotiated  with  National  Westminster
Bank.   This  package  provides  all  development  finance including  interest
up  to  rent   commencement  in  March   2001.  On  completion   the   Group's
investment   in 1-10  Union  Street  will  represent a substantial  proportion
of  the  Group's overall net worth  and  it  is  proposed  that  the  property
will  be sold to  enable  reinvestment  in  property  more closely aligned  to
the  Group's  core  business.   On  rent  commencement  the   estimated  total
costs  will  be £18.4 million  showing a yield of 10.9%. This development  has
been included in  the report and accounts at cost.

Works  to add an  additional  floor  and  refurbish  the upper floors  of  the
Ensign  Court,  a  former  flatted  factory  located  on The  Highway  in  the
fringe of the City of  London,  were  completed  in  1999.  This space (15,983
sq.  ft)  was   let  to  News  International  on a 14 year lease  (coterminous
with  the  earlier letting  of  the  ground  floor  to Oddbins) at a  rent  of
£306,000, £19.15 per sq.  ft, in  March  2000.  Following  these  lettings the
property has become  more  institutionally  attractive  and accordingly  it is
proposed that the investment be marketed during 2000/01.

The   programme  of  improvement   at  Kingsland   Viaduct   is   now  largely
complete. This  series  of  105  railway  arches stretches for a mile  between
Broadgate  in  the   City, to  Dalston,  in Hackney,  and   comprises   around
290,000  sq.  ft of space.  Workspace Group  is  in  a  partnership  agreement
with  the  London  Borough  of  Hackney  and  London Transport under which  it
acquired  an  income-sharing long-leasehold  interest  in  the   property   in
return  for  an obligation to invest £2.3m.  For  the  past   four   years  of
our initial expectations.

Work on the 19,645 sq. ft Helix Business Park  was completed on programme  and
to  budget.   This  is  a  new-build   scheme  of  20  units   of   small-unit
light-industrial  workspace in  Camberley  and   is  a   joint   venture  with
Surrey  Heath  Borough  Council.  The  property  has  attracted   considerable
interest and by late May 2000 seven units had been let at an average  rent  of
£10.19  per  sq.  ft.  It is anticipated that at  full  occupancy  the  estate
will yield £178,500, showing a 12.2% return on investment.

At  3  Mills  Studio, the Group has  this year  focussed  on   promoting   the
accommodation  created during the conversion of the former  Bottling Plant  to
create Rush House  and   the  Rooftop  and  Waterhouse  Studio  complexes.  In
addition,  works were completed to  create 20  moorings   for  narrowboats  on
the  site.  The refurbishment  of  the  adjacent  Sugarhouse  Yard   to  bring
back  into  use 45,000 sq.  ft  of  space  has commenced.  As noted earlier  a
joint  venture with  Copthorn  Homes  was  agreed  following the year end  for
the  development  of  residential  accommodation  on  a  vacant  part  of  the
site.   Letting  performance  during the  current  year  will be important  in
setting the future pace of development work at 3 Mills Studios.

The investment portfolio

At  31 March 2000  the  Group owned 94 estates: some  5.68  million  sq. ft of
accommodation  in   3,523  lettable  units  with  an  aggregate  valuation  of
£312.4 million.   86.1% of  the  portfolio  by  valuation,  and 77.6% by space
is in London and the South East, with  the  rest  in  the  Midlands. The Tonex
portfolio  acquired during  the  year  represents  26.3%  by   value 31.8%  by
space, of the total year end holdings.

Portfolio Valuation

At  31 March 2000 Insignia Richard Ellis  valued  the  Group's  portfolio   at
£312.4    million   showing  a   surplus  (for  accounts  purposes)  of  £31.2
million.

The   valuation   was  conducted  in  compliance with the Practice  Statements
contained  in  the  Appraisal  and  Valuation  Manual  prepared by  the  Royal
Institution  of  Chartered  Surveyors  on  the basis of open market  valuation
as defined in Statement 4.

The £216.3 million sum for freehold properties includes a  valuation  of £18.7
million for 1-10 Union Street, Southwark. Since this property is classified as
undergoing development it is shown in the accounts  at its book  cost of £10.9
million.  The short leasehold Alpha Business Centre, valued at  £0.35 million,
is  also  included  in  the accounts at a  nominal £1.  For accounts purposes,
therefore, the  Group's  properties  are  valued at £304.3 million,  as shown
below:

Analysis of valuation at 31.3.2000
              
                   Valuation     Adjustment     Financial
                          £m             £m            £m
                          
Freehold               216.3           (7.8)        208.5
Long Leasehold          95.8              -          95.8
Short Leasehold          0.3           (0.3)            -
---------------------------------------------------------                     
Total                  312.4           (8.1)        304.3
---------------------------------------------------------

For  properties held throughout the year (comparing their  value  at  31 March
1999,  plus additions and improvements at cost, with  that  at 31 March  2000)
the uplift was £24.2 million or 13.2%.  A further uplift  of  £7.0 million or
8.1% arose from acquisitions.

Again  we commissioned the Investment Property Databank (IPD) to  compare  our
portfolio's ungeared performance with the All-Fund  (All-Property) index  over
one,  three  and  five calendar years. The Group's  performance exceeded  the 
All-Fund index by a  wide  margin  in  all these  periods  and achieved  first
percentile performance when measured over the one and three year period.

Workspace Group v IPD All-Fund Index (%)

                          One        Three        Five
                         Year        Years       Years
------------------------------------------------------
Workspace Group         24.9%        22.7%       19.6%
IPD All Fund            15.2%        15.1%       12.1%
Workspace Group                    
Percentile Rank           1st          1st         2nd
                       

Improvements in valuation arise partly from market  movements  but  also  as a
result  of  value  adding  activity  through  acquisition,   management    and
refurbishment/ redevelopment.   Comparison  against  indices  such   as  these
segregates  simple  market  movement  from  value-adding activity.   With  its
top-ranking   performance  over the medium term the  Group   has  demonstrated
its ability to generate enhanced returns from its investments.

Financial Review

Profits before tax at £8.76 million  are 5.35% ahead of last year.  Despite an
increased taxation charge (effective  rate  up  from 21.4% to 25.5%), earnings
per share increased by 0.4p to 41.6p.   For trading  operations i.e. excluding
profits  and  losses  on    disposals   together   with  other  one-off costs)
profits before tax were 19.5%  and  earnings  per share   20.4%  ahead of last
year.  The valuation surplus of £31.2  million  represents  £1.98  per  share,
taking the  net asset  value  at 31  March  2000 to  £9.04   per  share (1999:
£6.83), an increase of 32.4%.  This continues  the  unbroken pattern of growth
delivered by the Group since its flotation in December 1993.

                     1999/2000  1998/1999         Compound
                        growth     growth           growth
                                               1995 - 2000                    
                            
                                           
Improvement in           19.5%      24.0%            28.0%
Trading PBT
Improvement in EPS        1.0%      31.6%            15.5%
Improvement in           10.5%      11.8%            16.0%
 dividends per share
Improvement in NAV       32.4%      30.6%            22.1%
                                                     

The  strong  underlying  growth  in   1999/2000   was  a  reflection   of  the
improvement in rental income and the  contribution  from  the  newly  acquired
Tonex portfolio.

Overheads  (excluding  other  items)  have   fallen  as    a   percentage   of
turnover from 15.1% to 14.5%.  Net  interest  increased  during  the  year  by
£3.84   million.    The  increase  in    interest   costs   was   attributable
principally  to  the increased  levels  of  borrowings  following   the  £74.7
million  Tonex acquisition which was  financed  entirely  by  debt.   Interest
costs of  £0.74 million (1999: £0.73 million)  were  capitalised  during   the
year.   These  relate   to  interest  charges  on developments   at  3   Mills
Studios, Helix  Business  Park,  Ensign  Court, and  1-10  Union Street.   The
Group  considers that  with  its  careful  focus  on asset values  underpinned
by    six-monthly   independent  valuations,  its   policy   of   capitalising
interest presents no risk of overstatement of asset values.

The  £993,000  of  interest  payable  classified  as  'Other Items'  comprises
breakage  costs  on repayment  of mortgages of  £528,000  and   write  off  of
previously   capitalised   loan  costs  of  £465,000  (both  relating  to  the
refinancing  of  the   Group's  existing  mortgages   at   the   time  of  the
acquisition and new financing).

Taxation

The  effective   rate  of  Corporation  Tax  in 2000 was 25.5% (1999:  21.4%).
The  effective rate  excluding  surpluses  on  property  disposals  was  24.3%
(1999: 23.8%).  The rate  increased  during  the  year  as predicted last year
due  to  the  absorption of  all  previously  written-off   ACT   and  capital
losses  in  previous periods with  the  result  that  none  was available  for
off-set  in  2000.  It  is  likely  that  the  Group's   effective  rate  will
stabilise at 27% or thereabouts.

Dividend

A  final dividend of 15p per share  is  proposed.   The  interim  dividend was
6p  per  share, and so the total dividend  proposed  for  the  year   is  21p.
The dividends are  covered  1.98  times  by  earnings (1.91 times if based  on
trading income only).

Internal performance measures

Internal benchmark comparison shows:
Performance measures                         2000    1999   1998   1997   1996
------------------------------------------------------------------------------
Turnover per member of staff                  277     277    247    231    209
(£000)
Year-end investment in property             2,340   2,268  1,967  1,610  1,505
 per member of staff (£000)               
Administration costs as a                   14.5%   15.1%  14.2%  14.6%  13.0%
 percentage of revenue                    
Total return on equity                      36.9%   36.3%  32.5%  27.5%   8.7%

Return   on  equity  is   computed  by  reference  to   pre-tax  profits  plus
valuation   surpluses/deficits   divided   by   opening  shareholders'   funds
(allowing for share capital increases during the year).  Our  target   is   to
achieve over  a  20%   return  on equity  year  on  year,  and  in  due course
(with expansion of  the portfolio), to  maintain  administration  costs  as  a
percentage of revenue at below 12%.

Financing

During the year a number of   major   financing  initiatives   were completed.

In order to finance  the  £74.7  million  purchase  of the Tonex portfolio and
repay  certain existing loans a  new  £122 million  facility  was   negotiated
with  WestLB.   This  facility    was  drawn   down    at  completion  of  the
acquisition. The  funding  was  structured  initially  as a secured term loan.
However  the  loan  was  subsequently  refinanced  through a transfer  into  a
commercial   paper   programme   operated  by  WestLB,  thereby  reducing  the
funding  costs by 15-20 basis points. It is  intended   that,  in  due  course
the  financing  via  the  commercial   paper  programme   will  be  refinanced
through a bond issue. Whilst  commercial  paper   is  essentially a short term
financing  instrument, by  backing  this  with   various liquidity  facilities
and a fall-back term loan   commitment  from  WestLB,  security (for 10 years)
and  continuity  of  financing   is assured.  Securitisation  was chosen as an
appropriate  funding route  by   comparison  with  existing facilities  partly
because it offered the  opportunity  to  ringfence   liability and hence  risk
at a time when   relatively  high (148%) gearing  levels  were  being assumed.
Its reliance  on  interest  and  debt  service cover covenants in place of the
more  conventional interest  and  loan  to  value  ratio covenants was also  a
key factor.  Interest/debt service  is  driven  by  cash  generation which  is
the principal financial driver applied by Workspace Group.

Separately  a  £14.4 million  project  finance  package   was negotiated  with
National  Westminster Bank to  Drawdown   under  the  loan also released  £1.5
million of the  Group's  investment  in  the  property.   Interest on the loan
is  at  a  margin  of  1.10% over  LIBOR  until  practical completion when  it
falls  to  1.00%. The loan is ringfenced  being  secured  only    against  the
Group's  investment in  the  property  and  the  Sainsbury lease.   The  Group
will  be seeking  to  dispose  of  this  asset during 2000/2001.   On disposal
it  is  anticipated   that  the  property  will  yield 10.9%  on  the  Group's
investment of £18.4 million.
 
Finally, the Group has  increased  and extended  its  revolving  property loan
facility  with National  Westminster  Bank  from  £13  million to £23  million
with  a  maturity of 18  months.   The  interest  rate  on this loan has  been
reduced from a margin of 1.5% to 1.1% over  LIBOR.  The  Group  also  holds  a
£2.5  million   overdraft   facility  with  National  Westminster  Bank  which
attracts interest  at 1.5% over base rate.


Borrowings over         2000    1999   1998   1997   1996
recent years


                                                    
% Fixed/hedged           93%     93%    59%    81%    52%
Average interest       8.48%   8.91%  9.56%  9.11%  10.5%
rates
Interest cover          1.87    2.32   1.98   2.07   2.11
Year-end gearing        104%     63%    85%    83%    85%

Year-end  gearing  of   104%   improved from  a   peak  of  148%   immediately
following  the  Tonex  acquisition. With  the  planned  1-10 Union Street  and
Ensign  Court disposals it  is  set  to  reduce  further.  Interest  cover  at
1.87   is  lower than last  year  due  principally  to  the higher  levels  of
borrowing.  Both gearing and  interest cover levels  are  within  the   levels
historically  set by the  Board  of  120% and  1.5 times.   The   Board  again
examined  the   possibility  of  redeeming  or  replacing its  original  £19.5
million   Debenture   Stock,  which   carries   historically   high    coupons
averaging 11.30%.  This  initiative  was  not  pursued  due to the potentially
high  cost  of  redemption.   The  Debenture  and   Convertible    Loan  Stock
represents just 16%  of  total  borrowings (1999: 28%).  As  at  31 March 2000
the total  Group  indebtedness (bank borrowings  net  of  cash in hand and  at
bank)  amounted  to  £148.7  million (1999: £68.4 million).   The maturity  of
net  debt and the  Group's  borrowings by  source  at 31  March 2000 are shown
below:

Maturity of net                  %       Borrowings by                %
debt                                     source
----------------------------------       ------------------------------
Under 12 months               (3)%       Debentures                 13%
Between one and five years     21%       Convertible loan stock      3%
Between five and ten years     24%       Commercial Paper/Funding   77%
Over ten years                 58%       Bank borrowings             7%
----------------------------------       ------------------------------       
Total                         100%       Total                     100%
----------------------------------       ------------------------------       
                                                 

The  Group  had further facilities  of  £19.0  million  undrawn  at  31  March
2000.

At  31 March 2000 the  average  cost  of  floating  rate funds was a margin of
1.03% over LIBOR or  base  rate  (1999:1.26%).  At  31 March  2000 the secured
borrowings  were  covered  2.05  times  by  the  value  of  charged   property
(with  a further £14.8 million  uncharged  giving an  overall  cover  of  2.16
times).   It  should  be  noted that  the  market  price   of   the  Company's
ordinary  shares has risen   above  the  conversion  price of  £5.00  for  the
Company's £4.04 million of  Convertible   Loan  Stock.  The  Directors believe
that  most stockholders, who receive  interest  at  11%  on their  investment,
will   wish   to   retain  their  stock  for the time  being  because  of  its
superior income yield.

Balance Sheet and Cash Flow

The  Group's netcurrent  liabilities at  31  March  2000  were  £8.52  million
(1999:£13.86 million).   Current  liabilities  include  tenants'  deposits  in
the  form  of advance rent  payments  and  quarterly  and  monthly  rents  and
service charge payments in advance  amounting  in  aggregate  to  £6.9 million
(1999:  £4.0 million).  The Directors consider  that  in  the  normal   course
of  business  these   liabilities   are  unlikely   to   require  payment  and
properly form part of the  working  capital  of  the  Group.  Operating  level
net  cash   inflow   of   £20.2   million   (1999:  £14.9  million)  improved,
principally  due  to the  contribution  from  the  newly  acquired  properties
together with increased profitability from existing properties.


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