NZ office occupiers taking 10% less space when moving into more agile workspaces
Technological disruption and behavioral changes are driving structural shifts in commercial property, as revealed at CBRE’s annual Auckland Market Outlook presentation on 15 March.
Presentations by CBRE’s Asia Pacific Head of Research, Dr Henry Chin, and Zoltan Moricz, Head of Research at CBRE New Zealand, showed that major structural shifts currently coming to the fore across the Asia Pacific region are also driving the New Zealand market.
One of these structural shifts is the rise in agile working, which has profound implications for the way office space is used. Unassigned seating is just one aspect of a truly agile business. ABW, third party space, co-working and flexibility around the way office space is used and leased are other real estate parts of a wider transformation into an agile organisation.
Benchmarking by CBRE of the way occupiers use space, covering 126,000sqm of space and 9,000 workstations, show two main structural changes in space use by office occupiers:
- Demand amongst occupiers for high quality new space is strong. Prime demand follows Prime supply, which in the Auckland CBD in the past three years meant that essentially all Prime space that entered the market since the end of 2015 has been taken up.
- A disconnect has emerged between employment and office space absorption. During the 2000s absorption growth has exceeded employment growth. However, since 2014 net absorption has increased significantly less than employment, as occupiers take less space per employee.
Zoltan Moricz says: “The overall trend is clear: occupiers have taken nearly 10% less space than they left behind.”
This is also shown in actual occupier relocations into newly built space during the past three years with 80,580sqm of old space taken up by 19 corporate businesses reducing to a total of 72,250sqm of new A-grade space reflecting a net demand impact of -8,330sqm net.
Moricz says that true agility sits in the organisational realm, as workplace and technology are only enablers.
“Agility is a paradigm shift in the way organisations work and it is having a profound impact on the property market. Our question is: Can companies effectively implement cultural transformation to become truly agile?
“Cultural and structural changes are needed that impact on organisational strategy (such as flexible resource allocation), structure (breaking down silos), and people (role mobility) and process. Most are struggling to achieve this transformation.
“In the medium term it means that workplace practices become disconnected from the organisational structure. What this simply means is that through growth, many companies sooner rather than later run out of space. This implies that the disconnect between employment and office absorption that has shown up in the past few years may be temporary and could even lead to an acceleration of absorption a few years out as companies catch up on employment growth.”
Moricz also said that overall investors retain strong investment appetite to real estate in 2018, with 92% of respondents saying that their investment activity will be the same or greater compared to 2017.
“Real estate funds in particular will be more active, as many funds are still in the capital deployment stage. We are clearly seeing the impact of this in New Zealand with CBRE hosting an unprecedented number of offshore institutional investors in the past six months.”ABOUT CBRE GROUP, INC.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com..
