Portfolio strategies and the rise of flex

CBRE Asia Pacific’s latest report on the Future of Work has recently been released and focuses on the office occupier sentiment on the future of their office portfolio and workplace across the region.

One of the four themes impacting how the future looks for New Zealand occupiers is the portfolio strategies that they are planning. We paired this with real life views from interviews conducted in the first half of 2021 where large corporate occupiers shared their view of lessons learned from Covid-19 over the last 18 months and the future impact this will have on their workplace and future strategy.

The rise of flex

Flexible space is changing portfolio strategies for organisations, with occupiers expecting to increase the amount of flexible workspace they have in their portfolios. In May, 43% of occupiers surveyed across Australia and New Zealand said they have no flexible workspace in their portfolio. However, in two years’ time they expect this to decrease significantly to 19% of their portfolio.

Proportion of occupiers with no flex space in their portfolio

Source: CBRE

What stands out from our research is the potential use of third-party flexible office space as an alternative to increasing office footprint, or providing more satellite type office locations. It strengthens the message around the move to the hybrid working style.

In the US demand is incredibly strong for flexible space, due to several reasons. Big corporates are looking to establish offices in regions outside of the main cities without the need to engage in long lease requirements, which is driving the demand for non-CBD flex operators. These contracts with flex space are easier to cancel or work month-to-month providing an exit strategy if required. 

In New Zealand, there aren’t many organisations currently expecting to set up in the regions as most employees are predominantly working from home when not in the office, but the demand for flex space is beginning to happen.

What portfolio strategies are your currently pursuing or planning to pursue?


Source: CBRE

Our team is working with an occupier who has experienced exceptional growth over the last 18 months enabling them to purchase two local businesses. However, with an existing lease tail at one building that didn’t have capacity for the whole organisation, they have opted to use third-party flexible space until closer to the lease expiry to allow them to cater for the wider growth through acquisition. Another occupier stated its business was exploring “having localised work options rather than one behemoth office in the centre of town,” demonstrating local interest for satellite office locations.

We believe strong demand for third-party space will become apparent over the next 24 months and at present there isn’t enough of the flex supply to match this demand. Businesses would likely still require a core hub, but this new demand of smaller spaces is expected to be met by third-party suppliers offering organisations space in locations with excellent transport connections, such as Albany, Takapuna and Sylvia Park. These need to be high-quality and attractive as organisations continue to work hard to entice employees back into physical workspaces, and enable collaboration through face-to-face contact and work to attract and retain their talent.

When interviewing large corporate landlords, they backed this view up that there will be changes coming: “I expect tenants to undertake major reconfigurations at their lease expiries and I'll be nervous when they do.” However additional commentary was also specific around timing: “From an occupier perspective a lot depends on where you are sitting in the lifecycle of your lease.”

With the current lockdown to stamp out the Delta variant continuing to effect Auckland and surrounding regions, the move to a flexible third-party contract may be the response that occupiers are searching for to introduce flexible working space into their portfolios.

The next part in our Future of Work series looks at how an increase in hybrid working and this perceived increase in flexible working space will impact workplace as we move into the future.