MORE than half of corporate tenants across Australia and New Zealand are looking to slim down their rented office space over the next two years, prompted by a global embrace of flexible workspace solutions, while many perceive landlords are struggling to keep up with demand and look past perceptions of the co-working space sector.
CBRE’s Pacific Corporate Co-working Survey: The Future is Flexible report, surveyed 60 large occupiers across Australia and New Zealand on their current and future planned use of third-party flexible space. It showed the flexible workspace industry occupies circa 193,200 sqm of across the six major capital cities, with 40% of occupiers using some form of flexible workspace solution.
Australia currently has the seventh largest presence of co-working operators globally at 25, while New Zealand comes in 35th with 62.
Larger flagship offices are beginning to emerge across the country. US-based giant WeWork has committed to occupying the entire 10,000 sqm of Daramu House in Sydney’s Barangaroo, to be completed in 2020, placing them close to the Barangaroo towers and near some of Australia’s largest companies occupying some of Australia’s most expensive office real estate. It also recently signed a lease over 4,100 sqm at 50 Miller in North Sydney.
It currently has nine locations operating across the country, with another half-dozen to be announced.
The last 12 to 24 months has seen larger international operators expand their footprints in Melbourne too, most notably Regus and WeWork. WeWork currently has two sites in the Melbourne CBD at 401 Collins Street and 152 Elizabeth Street, and will open at 222 Exhibition Street.
Regus and Christie Spaces are revisiting their Brisbane offerings to include co-working space in addition to the traditional serviced office spaces they typically provide. Christie Spaces launched Common Ground at 320 Adelaide Street last month.
Spacecubed has dominated the Perth co-working space sector, with four locations in the CBD. It is expected that WeWork is set to provide competition over the coming 12 to 24 months as it seeks out a new space.
The next five years will see rapid growth in co-working space throughout the APAC region, as China looks set to become the largest market by 2022.
Workspace producer Regus suggested flexible working could contribute up to $122 billion to the Australian economy by 2030, through cost savings and boosted productivity.
The analysis, commissioned by Regus and conducted by independent economists, said Australia would see a total gross value add (GVA) increase of 94% because of flexible working. A rise in flexible working would also benefits individuals, and could save Australians 56.5 million hours of commuting time per annum by 2030.
CBRE’s survey showed some 58% of Australian corporate occupiers plan to reduce their traditional leased office space in the next two years, while 55% are looking to increase co-working space use and 40% intend to increase the use of meeting and event space.
Only 28% of companies have no plans to adopt flexible workspace solutions across their portfolio.
Auckland’s flexible office space market is dominated by IWG, with its Regus, Spaces and BizDojo brands; Generator, a local operator with an Auckland focus; and Smales Farm, which developed and manages an 11,000 sqm coworking office building in Takapuna on the North Shore. The sector has created a clear drop in the take-up activity of small occupiers. In the second half of last year, take-up activity of businesses requiring 50 sqm to 200 sqm was slashed by half. Wellington, meanwhile, is dominated by IWG, and despite growing demand as a relatively immature market that is still catered to start-ups and small businesses.
CBRE head of Office and occupier research, Felice Spark, said the uptake of flexible space would only accelerate as more corporates capitalised on the opportunity to have greater workplace flexibility.
“Flexible space is no longer viewed as being the exclusive domain of entrepreneurial, start-up companies. It’s apparent through the survey that many corporations are seeking to decrease their exposure to long term leases,” Spark said.
Nicole Fitzgerald, CBRE national director of workplace strategy, said the survey findings highlighted that there was key opportunity in the market for operators and landlords to provide greater diversification in the co-working space offering to meet the different needs and preferences of industry groups.
“Today, co-working in Australia has a brand problem for large corporates. It is too strongly associated with a traditional start-up setup with bean bags and ping pong tables.
“Larger corporates want the flexibility but need a more sophisticated and brand aligned experience in an environment that enables and supports fast paced innovation and positive disruption.”
Notably, the survey found 44% of occupiers think landlords are not adapting to meet occupiers’ changing space requirements and 17% believe landlords are responding very poorly.
“Technology has revolutionised working methods and has aided the progress of an increasingly itinerant working style,” Fitzgerald said. “For landlords, the opportunity exists to adapt their existing office product to meeting the evolving needs of their tenants. Flexible workspaces are becoming the point of reference for companies reassessing their commercial real estate requirements, and landlords need to understand this and adapt accordingly or risk being left behind.”
Australian Property Journal