Is the workplace sublease explosion a myth?

When New Zealand went into lockdown in March 2020, our office leasing team saw a spike in subleasing enquiries within the Auckland market. A year on, the true picture of actual physically vacant workspace sublease versus what was, and is, simply workspace availability is now becoming clear.

Both Covid-19 related business downturn and disruption along with workplace trends played a part in the desire to sublease space in 2020, predominantly due to the required shift to work from home for many organisations over a large part of last year, an unknown end date for the pandemic and how the workplace would emerge after normality, or what we now consider normal, resumed.

What we’re seeing is that vacant sublease space, which is defined as truly available and vacant to sublease, totalled only approx. 33,000sqm making up 25% of the sublease market. The additional 75% or 100,000sqm was available workspace within an organisation’s footprint but not readily vacant.

With the overall Auckland office market totalling 3.17 million sqm, this 33,000sqm equalled only 1% of the Auckland office workspace being physically vacant for subleasing, quite different from what the vibe appeared to be during 2020.

As New Zealand continues to successfully curtail community transmission of Covid-19 and the economy has recovered better that initially predicted, this is translating into a strong rebound in leasing activity that has been pent up during most of 2020.  

The Auckland office leasing sector continues to offer multiple options as many organisations embrace different ways of working. But some elements to consider:

• Even with a higher percentage of employees working from home, organisations are needing to have the space to flex and accommodate peak numbers of employees when required throughout any given day
• Many businesses are requiring employees to return back to the office for much of the time and normal capacity needs to be maintained. Therefore, subleasing space, which for a frenetic period may have been the option considered, has now been reabsorbed for normal working activity within an organisation
• New leases currently being negotiated, while typically providing desk space for the majority of an organisation's full-time employees, are also requiring greater space for meetings and collaboration. While the overall impact on office occupation is still inconclusive, indications at this stage suggest that any reduction will be negligible, and offices will be used as a tool to bring staff back into their HQ.
• Organisations that decided to downsize have plenty of alternatives in the market to choose from including flexible options and coworking spaces, which continue to be attractive to employers seeking ongoing flexibility.

Overall, Auckland occupiers are not lacking in options and, fundamentally, our view remains that the office leasing sector is strong and not unduly impacted by the subleasing trends we thought would emerge during and after the lockdowns of 2020/21.