Written by Gergely Gaspardy - CBRE Agile Working Group
One of the biggest changes in the office market in New Zealand and across the Asia Pacific over the past decade has been the surging demand for flexible office and co-working spaces.
To get an idea of the scale of this you only need to look at Shanghai, where the total size of the largest 15 operators’ footprint increased from less than 50,000 in 2015 to 495,000sqm in March 2018, a tenfold increase in just three years.
In Auckland, there’s been phenomenal growth over the same period with the size of the flexible space market increasing from less than 10,000sqm to over 40,000sqm. Most of the new stock being high quality coworking centres in Britomart, Wynyard Quarter and Smales Farm offering full package enterprise solutions in addition to the traditional community focused environment.
The growth has been coupled with a widening range of space solutions, as the client base of operators expanded beyond freelancers and start-ups towards corporate occupiers, increasingly seeking opportunities that allow operational and people-related benefits through more flexibility.
Large banks, accounting firms, telco and media businesses are all among corporates that recently took up space in the new centres due to the operational and people-related benefits it provides.
Perhaps even more importantly, the sector is expected to continue its growth in the next few years. WeWork have been in discussions with multiple landlords to find the most suitable location for their first centre in Auckland, IWG have taken up three full floors in the new Commercial Bay office development, expected to be completed in early 2020, and Generator is also actively looking at further expansion options.
Recent CBRE Research estimated that in the next two years the sector’s total Auckland size can increase to over 60,000sqm, and based on some international examples that indicate the sector’s saturation at about 3.5% of the total office stock, there’s every indication the flexible office solutions market could reach around 100,000sqm by 2025.
Origins of demand
It’s not as if flexible office solutions are exactly new products in the commercial property market. The first incubator-type spaces (offering flexible accommodation and operational support to new businesses) spread across the US in the 1970s, while Regus, the world’s largest serviced office provider, opened its first centre in 1989.
What changed though since after the global financial crisis, are the size and typology of flexible office solutions and the types of businesses using them. Rapid technological developments didn’t just provide mobile devices that enable flexible working, but also brought seamless connectivity between places of work, allowing employees to stay connected at various locations. This new mobility, together with the fact that during the GFC many employees lost their jobs and have become freelancers and entrepreneurs with new businesses, increased the demand for short term leases often on a per desk basis.
Between 2010 and 2015, the vast majority of new flexible solutions were essentially coworking centres, focusing on the community building aspect in addition to providing short term leases.
In the past three years though, there’s been a proliferation of different flexible solutions from bookable meeting and event space to turnkey solutions, increasingly catering for the demand of large corporates looking for more flexibility in their property portfolio.
It found about a quarter of large office occupiers (23%) currently use flexible office solutions in the Auckland market. Most of these businesses use serviced offices, although coworking centre users were not far behind. In terms of future plans, an additional 39% of the participants indicated that they are considering the use of flexible office solutions in the next couple of years. Reasons given for why they wouldn’t include security issues and lack of corporate branding and identity. As most operators in the Auckland market can cater for these concerns the survey suggests it is more an education than service offer issue.
Occupiers in the survey also indicated a strong preference for both coworking space and bookable meeting/event space. The latter proving particularly attractive for law firms and occupiers currently maintaining large (most probably underutilised) meeting rooms in their core office space.
These are all points that will need to be considered by any savvy occupier, operator and landlord in the coming years as it’s clear the demand for flexible office space is only going to grow. For more specific guidance on this front, and to learn more about the opportunities in the Auckland flexible office market. Get in touch with our Agile Working Group.
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