OFFICE WORKSPACE 2018 New Zealand Fixed-Term and TRENDS Flexible Workspace Report FIXED-TERM WORKSPACE
Industry Trends
Occupiers committing to longer fixed-term agreements are resolute in their approach to limit the impact from rising occupancy costs while maximising staff productivity and wellbeing. The type of space on offer in many lower quality existing premises limits the extent of what is achievable. However, design efficiencies in higher quality and new office buildings have activated increased levels of density that are unlikely to be meaningfully surpassed in the future.
>>The increase in density (less space practices, biophilic environments and be slow to implement certification per person) achieved in higher bespoke zones. due to a limited number of occupiers quality and new premises between requiring formal accreditation over >>Many organisations have massive our 2016 and 2018 surveys has been and above the best practices already periods of idle desk use, with some overshadowed by the nominal shift being employed. organisations Colliers has surveyed in increased density recorded in the suffering up to 45% vacancy periods. >>To counteract the elevation in flexible overall New Zealand results. Data-driven occupation strategies workspace popularity amongst >>Tenants with the ability to move into are rising in popularity amongst staff and occupiers, landlords are new, higher specification, technology- landlords and occupiers to more incorporating more flexible workspace driven premises are experiencing quickly and accurately optimise office initiatives into their buildings/ significant gains in occupancy ratios, space usage, identify space for bursts portfolios. Ranked highly amongst combating the higher total occupancy of high utilisation as well as boost these initiatives is the ability to deliver costs associated with premium and staff productivity and wellbeing. a collaborative aspect and feel to A-grade buildings. Although technology is driving greater the premises by incorporating new understanding in this area, privacy software and employing community >>Density rates in new buildings and data ownership remain key points managers to connect staff with are approaching a natural rate of of contention. landlord intentions and building efficiency that once surpassed operations. can forego benefits made in staff >>The benefits of staff health and productivity, retention and talent wellbeing on performance and attraction. This is despite using productivity is well documented, but Activity Based Working (ABW) the New Zealand office market will
*See back page for a definition between fixed-term and flexible workspace.
2 Colliers International - Office Workspace Trends 2018 Kiwi Property - Level 7, Vero Centre, Auckland Source: energylight.net
Survey Results
>>The average CBD office density for longer, >>Auckland CBD’s average office density of 21.0 sqm fixed-term workplace leases in New Zealand has per person in 1998 has increased significantly increased (less space per person) between the in recent years. Although density rates over the 2016 and 2018 surveys to 16.5 sqm per person past decade have been broadly similar, our latest compared to 17.2 sqm per person respectively. survey highlights the industry’s focus on efficiency and best practise workplace design, especially in >>The Information Media and Telecommunications new office developments. sector has one of the highest (low space per person) average density rates at 12.2 sqm per *See back page for survey background and explanation person. This aligns with the sector’s early adoption of TOC. of Activity Based Working (ABW) and flexible workspace initiatives.
>>Total occupancy cost (TOC) per sqm has increased from $427 per sqm to $439 per sqm while cost per person decreased, from $7,328 to $7,242 since the 2016 survey. The decrease per person AUCKLAND CBD OFFICE DENSITY was due to the office density sqm per person (M²/PERSON) VS TOC ($/M²) increasing.
>>In the private sector, the average office density Total Occupancy Cost ($/m²) Oce Density (m²/person) increased from 18.1 sqm in 2016 to 16.7 sqm per $700 25
person in 2018 and TOC is at $7,564 per person ) ² O m p.a. and $452 per sqm. $600 / c
$ 20 ( e
t
>>In the public sector, the average office density $500 D s e o n
increased from 16.0 sqm to 15.5 sqm per person C s 15 i
y $400 t y
and TOC is at $5,824 per person p.a. and $376 per c
n ( a
sqm. m p $300 ² u 10 / c p >>Prime office space has experienced an increase in c e O r
$200 l office density between the 2016 and 2018 surveys, s o a t 5 n o from 17.8 sqm per person to 14.5 sqm per person. )
T $100 >>Secondary office space has experienced a $0 0 decrease (more space per person) in office density 1998 2000 2004 2008 2010 2012 2014 2016 2018 between the 2016 and 2018 surveys, from 16.6 sqm per person to 18.7 sqm per person. Source: Colliers International Research
Colliers International - Office Workspace Trends 2018 3 FIXED-TERM Office Occupational Survey WORKSPACE Results
Office Density Per Person Explanation Higher density refers to less space per person - space is being used more intensely. Lower density refers to more space per person - the space is being used less intensely. For example, 16 sqm per person is a lower density rate than 14 sqm per person. If the change in the two rates is being interpreted, a change from 16 sqm per person to 14 sqm per person represents an increase in density and a decrease in space occupied per person.
AUCKLAND CBD Office Density Total Occupancy Cost Total Occupancy Cost Grade (m2/person) ($/m2) per person Prime 13.1 $604 $7,887 Secondary 17.5 $501 $8,774 Overall 13.5 $590 $7,979
AUCKLAND METRO Office Density Total Occupancy Cost Total Occupancy Cost Grade (m2/person) ($/m2) per person Prime 17.8 $517 $9,213 Secondary 22.2 $378 $8,386 Overall 19.8 $445 $8,829
WELLINGTON CBD Office Density Total Occupancy Cost Total Occupancy Cost Grade (m2/person) ($/m2) per person Prime 14.3 $499 $7,155 Secondary 14.6 $371 $5,409 Overall 14.6 $393 $5,713
CHRISTCHURCH CBD Office Density Total Occupancy Cost Total Occupancy Cost Grade (m2/person) ($/m2) per person Prime 16.7 $370 $6,188 Secondary 20.7 $341 $7,050 Overall 17.5 $363 $6,357
4 Colliers International - Office Workspace Trends 2018 REST OF NEW ZEALAND* Office Density Total Occupancy Cost Total Occupancy Cost Grade (m2/person) ($/m2) per person Prime 15.4 $353 $5,443 Secondary 24.4 $220 $5,364 Overall 17.6 $309 $5,424
*Rest of New Zealand includes Hamilton CBD, Tauranga/Mount Maunganui CBD Change from last survey (2016) and Dunedin CBD
Colliers International - Office Workspace Trends 2018 5 FLEXIBLE WORKSPACE
Industry Trends
New Zealand’s flexible workspace sector is expanding, evolving and broadening its services to become an important component of office market demand. Changes in the structural make-up of our workforce and the introduction of a 5G mobile network will boost the sector’s importance and attractiveness well into the future.
>>The flexible workspace sector has perception of office environments and >>Community at scale along with doubled in the past three years, and operating models to satisfy their need geographic presence is where our forecasts show this will double for a better work and life balance in a operators are unlocking the growth again within the next five years. One more immersed and connected world. opportunities and outperforming of the main reasons holding the sector landlords with limited dispersed >>The emergence of a 5G mobile back from faster growth rates is the geographic presence. network capability in New Zealand by low levels of vacancy and high levels 2020 with a thousand-fold increase in >>Changes to International Financial of rental growth reducing available mobile speeds will enable an almost Reporting Standards (IFRS) in relation options. unlimited amount of new opportunities to lease liabilities will likely add to >>Considered an office sector disruptor, for people and businesses to explore, the growth and attractiveness of the the flexible workspace sector is being but also elevate the connection flexible workspace sector for some disrupted itself as its popularity grows between home, work and community tenants, but not hamper the growth and operators and landlords focus experiences. in the existing fixed-term workspace on their customers’ needs. This has sector. Anecdotally, companies are >>Auckland will continue to lead the meant the sector continues to evolve, looking to push the boundaries when sector in operator numbers and especially as the division between establishing some fixed-term leasing, occupied space. Key reasons are its coworking, serviced offices and defining them as flexible workspace scale, population and employment buildings with vertically integrated to avoid some IFRS implications, growth, density and member access. community environments are all however, this is unlikely to be becoming more closely aligned. >>As the sector grows in scale and successful. age, operators and landlords are >>The tenant mix is broadening. Tenants >>Most new major office buildings will looking at different flexible workspace of all sizes and industry focus are now incorporate flexible workspaces models. Two prominent models that looking to take advantage of the in some capacity as landlords look to have emerged include the ‘flex and sector’s ability to foster innovation, take advantage of the sector’s growth core’ and the ‘city campus’ styles of ideas, creativity and productivity. potential and avoid the fear of missing operations. These assist tenants in out in capturing new sources of tenant >>Increasing the popularity of the sector their quests to appropriately service demand. in the future will be Millennials who existing and new geographic locations have a greater affiliation with flexible while allowing flexibility in expanding workspace trends and are on the cusp or contracting staff numbers. of becoming the largest generation in the workforce. They will drive the
*See back page for a definition between fixed-term and flexible workspace.
6 Colliers International - Office Workspace Trends 2018 Smales Farm, Auckland - BHIVE
Survey Results
>>Currently, there are around 117 flexible workspace MAJOR OPERATORS BY SIZE & LOCATION facilities covering 85,545 sqm across New Zealand that we have identified, with the majority located in the Auckland Region (40), followed by Canterbury 16,000
Region (23) and Wellington Region (14). In the rest 14,000 of the North Island, there are 27 facilities and 13 facilities in the rest of the South Island. 12,000
>>Flexible workspace facilities occupy around 1.5% 10,000
of the current Auckland CBD office stock, 1.4% ² )
( m 8,000
a
of the Christchurch CBD office stock and 0.8% of e r A Wellington CBD office stock. 6,000 e l b
t a 4,000
>>By 2023, we project flexible workspaces in e L Auckland region to account for around 2.7% of the 2,000 total office stock. This is likely to be a conservative t ² ² ²
0 r s s s s s estimate given the likely growth in new smaller s s e g b d t n r e e r p r p o o o s e z a u c e v e u u u n i i i i t m m m i n t c e a u g g g H r a i d d A K L m a 0 0 0 a
H W e o e e e m e r a r k i u u n
operators entering the market in to the next few C o D e 0 0 0 n d h e
e o R R R I r v c o r v c o B : l k s p N a R S p 6 6 6 e n t S t S t
R
r e
n t
l c e e h i I r b ≤ ≤ ≤ S e S e G - W C b b a
years. T h r o G t m u o i U e S e Q Q @ T
o r s r s r s
C g h i e X e C o o o T
t t t h D T r e r a r a r a v y
>>In Auckland back in 2014, the majority of flexible E D e e e e h p p p S a A T a O O O
workspace facilities were located in the CBD. g N However, it’s now changed with the majority Major Operators located outside of the CBD and by 2023 it will be Source: Company Websites, Colliers International Research much the same. In contrast, in Wellington and Christchurch, the majority of facilities are still situated in the CBD.
>>The three largest operators in the Auckland region AUCKLAND REGION FLEXIBLE WORKSPACE occupy around 36,370 sqm combined. SUPPLY >>The three largest operators in the Wellington CBD Metropolitan Number of Auckland Facilities region occupy around 8,870 sqm. 100,000 60 >>The two largest operators in the Canterbury region 90,000 50 occupy around 5,200 sqm. 80,000 N u
70,000 m >>For the Auckland Region, the average casual desk ) 40 b e m ² (
60,000 r rate is $310 per desk per month and the average
a o e f
fixed desk rate is $657 per desk per month. r
50,000 30 F A a
r c i o 40,000
>>For the Wellington Region, the average casual desk l o i l t
20 i F rate is $304 per desk per month and the average 30,000 e s fixed desk rate is $547 per desk per month. 20,000 10 >>For the Canterbury Region, the average casual 10,000 desk rate is $307 per desk per month and the 0 0 F F 5 6 7 4 F P 1 1 1 1 0 3 9 average fixed desk rate is $485 per desk per 8 0 0 0 0 1 2 2 1 2 2 2 2 0 0 0 0 2 2 2 month. 2
*See back page for database background and pricing Source: Company Websites, Colliers International Research explanation.
Colliers International - Office Workspace Trends 2018 7 AUCKLAND CBD AUCKLAND REGION NUMBER OF 40 FACILITIES ESTIMATED LETTABLE QU AY ST 2 REET 54,050 AREA (M ) C USTO MS S TREE EET T WE STR FANSHA Q CASUAL DESK RATE T B UAY SH E E ST OR RE A REE TLAND ST C T H R MIN AVG MAX T O E A VICTORIA STREET W E D R T T S E E N ND R E RA T T E S $140 $310 $485 S U HE N Q T O S L E
N S
W T E
L G FIXED DESK RATE L E E S O
L R E T Y E P G A E E S R MINR AVG MAX T S T N T R S
E Y E B E E LE L E T N L A A Y R W ST R T O R S A O
N D A E Y A $360 D $657 $1,350 E W U R O Q T A O O M T N E A A B R Q U T N E U TO E A G R Y IN T T LL H S E O W R Y E N L D N O A TN S M Q U T U A E L Y G R RE A T V S E S
T
TH R
R
E Y
O A E U W T Q S O E LO L R
WELLINGTONO CBD WELLINGTON REGION E M T A W NUMBER OF
T E E FACILITIES R T
Y 23
S A
N U O Q T N S R O E ESTIMATED LETTABLE T H B T M A
A E 2 L F 15,175 AREA (M )
J
E
R
V OI CASUAL DESK RATE S
Q T U A Y MIN AVG MAX TREE S IS L IL W C AB D LE $120 $304 $500 IXO STR DE N ST EET ARA REE ORIENTAL P T
C OU RTN EY P FIXED DESK RATE LACE
E C A MIN AVG MAX V R IVIA R N S E TR T EE T T N E BUC K KLE STR $247 $547 $726 EET
BEALEY DRIVE V IC CHRISTCHURCHT CBD O R CANTERBURY REGION IA D
S M A N T U
R R M
EE H A C H
AM T D NUMBER OF R E A
S S S
T T
R E S
E R T R FACILITIES P
E
A S
T 14 E
R T
N
R K T
O
E T
R E E
T T R
H
R ESTIMATED LETTABLE
A C E 7,250 AREA (M2)
U E C
GLOUCESTER STREET GLOUCESTER STREET N A
M
E M V
O B A
N CASUAL DESK RATE R
T D I
R L D
EA A G E
L E R T HEREFORD STREET HEREFORD STREET MIN AVG MAX G
S E R
T I Z
RE F R
A
E
T C E
LICHFIELD STREET LICHFIELD STREET $200 $307 $399
D
U
R
H
A
M
E S ST ASAPH STREET ST ASAPH STREET NU T R FIXED DESK RATE VE A E EY E GL T
A H S
O MIN AVG MAX
U
T H MOORHOUSE AVENUE MOORHOUSE AVENUE $299 $485 $600
8 Colliers International - Office Workspace Trends 2018 FLEXIBLE Flexible Workspace Survey WORKSPACE Results
REST OF THE NORTH ISLAND NUMBER OF 27 FACILITIES ESTIMATED LETTABLE 5,875 AREA (M2)
CASUAL DESK RATE MIN AVG MAX $130 $300 $496
FIXED DESK RATE MIN AVG MAX $299 $494 $800
REST OF THE SOUTH ISLAND NUMBER OF 13 FACILITIES ESTIMATED LETTABLE 3,195 AREA (M2)
CASUAL DESK RATE MIN AVG MAX $103 $245 $375
FIXED DESK RATE MIN AVG MAX $200 $409 $540
*See back-page for pricing explanation
Colliers International - Office Workspace Trends 2018 9 FLEXIBLE Asia Pacific Summary by City WORKSPACE (Based on CBD’s)
CHENGDU
8.0% 23,200
9 $273
DELHI NCR
10.7% 1,400
14 $517
MUMBAI
4.0% 27,900
11 $488
BENGALURU
17.6% 23,200
27 $301
SINGAPORE
3.9% 51,100
113 $930
JAKARTA
1.9% 32,500
80 $268
*The number of facilities and the average desk rates outside of New Zealand as at the Dec-17 quarter (NZD/USD 0.697). New Zealand information as at Sept-18 quarter.
10 Colliers International - Office Workspace Trends 2018 BEIJING
2.9% 111,500 KEY Percentage of Flexible Space Leased by 900 $832 Workspace (2018F) Operators (m2) (2018F) Number of Flexible Average Desk Rates Workspace Centres* (NZD/mth)* SHANGHAI
8.0% 185,800
285 $459
SHENZHEN AUCKLAND
1.0% 46,500 1.5% 3,100
11 $976 14 $794
WELLINGTON HONG KONG 0.8% 1,500 3.0% 23,200 15 $591 46 $1,579
MANILA
2.5% 18,600
80 $502 CHRISTCHURCH 1.4% 600
9 $505
SYDNEY
2.6% 26,000
52 $718
MELBOURNE
1.6% 41,800
47 $825
Colliers International - Office Workspace Trends 2018 11 What is the difference Office Occupational Flexible Workspace between fixed term and Survey Survey flexible workspace? Background Background
Flexible workspace is evolving, but This is the ninth edition of our biannual This is our second edition of the primarily aggregates the sectors of office occupational survey. Leases with flexible workspace report. Our flexible serviced office space and coworking. an effective date (date of occupation) workspace database covers the The sector incorporates the more between August 2016 and July 2018 majority of New Zealand facilities, modern form of short-term occupation have been analysed in Auckland, with analysis on operator’s space and of space between a person, a team Wellington, Christchurch, Tauranga, pricing. or organisation with an operator Hamilton and Dunedin to assess Pricing for a causal/hot desk (part- or landlord agreeing terms on a TOC and space efficiencies. We have time) and fixed/permanent (full-time) membership, desk cost, or area excluded leases that accommodate desk varies from operator to operator that incorporates a wider sense of less than five full time employees from and facility to facility. Base rates are community and integrates people, the analysis. The presentation of the determined by the cost of the space to spaces and technology. dataset is designed to avoid individual lease and the operating expenses to transactions being recognised. Fixed-term workspace comprises the run the facility. The variation in higher more traditional leasing model of a The total operating cost (TOC) is pricing mainly comes from the variety fixed-term leasing agreement between the property cost of leasing net of product offerings and services a tenant and landlord for a dedicated lettable space excluding GST. For provided by the facility/operator. These annual term with a defined area of the purposes of our survey, this include items such as the use space at a dedicated rate per square includes rental, operating expenses of common areas, an onsite bar and metre. Fit-out costs and make-good and car parking costs. Other property cafés, a concierge service, printers clauses apply. costs such as furniture, information and copiers, meeting rooms, utilities, technology and utilities are excluded. internet and tech help, 24-hour facility Leasing incentives such as rent-free access, number of days of use and periods and fit out contributions are hot-desk or assigned desks. The excluded. Where fit out rental or other pricing also varies with the number of improvements rental is payable, this is the occupants and their indented use included in the total occupancy cost. of the facility.
For more information contact:
Chris Dibble Rob Bird Colliers International Director | Research & Communications National Director | Commercial Leasing Level 27, SAP Tower Auckland 151 Queen St, Auckland Elena Christodoulou +64 9 358 1888 Research Analyst Jim Pinson Director | Commercial Leasing colliers.co.nz Josh Lee Wellington Research Analyst Brynn Burrows
Director | Commercial Leasing Emily Duncan Christchurch Research Analyst
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