March 30, 2018
Technological developments and agile working methodologies are driving significant, structural changes in the requirements for commercial property in New Zealand, according to new research from CBRE. 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. Activity based working, third party space, coworking 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 percent 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 percent 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.”