Bayleys Auckland commercial director Lloyd Budd
Generational changes, increasingly flexible work practices and fast-developing mobile technology mean that growing numbers of businesses now have very different requirements when it comes to office space.
This means that not only are traditional cubicle and room-based office fit outs falling out of favour, but the trend towards shared spaces and co-working spaces is gaining major momentum globally.
Yet a new study being conducted jointly by several Australian universities suggests that commercial landlords are not yet jumping on board.
Bayleys Auckland commercial director Lloyd Budd says businesses increasingly want workplaces that bring out the best in their employees.
“They look for features that support collaboration, wellbeing and flexibility in workstyles. So the trend in new office developments is for shared, open working spaces, centralised meeting hubs, segmented spaces and light, airy interiors.”
Colliers International national leasing director Rob Bird agrees that flexibility is a key trend with more staff working offsite and businesses seeking new ways to consolidate office space
He says that, for many, this is leading to a growing distinction between their ‘core’ and ‘flexible’ space needs – and that will increasingly reshape office spaces.
“Some modern office buildings provide shared facilities – like meeting rooms, event spaces and printing and photocopying areas - that enable the building’s various occupiers to access flexible space when they need it.”
New office stock set to come on to the market in the major centres will cater to these changing tenant requirements.
But there is also a growing interest in co-working office spaces, which can include combinations of private offices, co-working spaces, flexible areas and even facilities like cafes.
Budd says that, for many businesses, co-working is a “no-brainer” real estate solution.
“With co-working, they get all the facilities of a modern office without the hassles of a lengthy lease. It’s also a way to tap into the start-up culture and win new talent and new clients.”
Such spaces will help provide Auckland with the level of supply the market has been demanding, he says.
“It’s clear the leasing model is evolving and that those landlords who provide their tenants with greater flexibility around time and space requirements are likely to end up winners.”
Despite this it seems that many commercial landlords are being slow to embrace these changing requirements.
At the recent Pacific Rim Real Estate Society Conference, held at the University of Auckland business school, Dr Dulani Halvitigala discussed the findings of the Australian study, which focuses on co-working spaces.
One of the findings is that many commercial landlords are being challenged by the growing demand for flexible, scalable, collaborative spaces with short term leases.
But the study also shows that while the co-working trend does present challenges for landlords, it also offers opportunities for them, says Halvitigala.
One option is for landlords, particularly those with under-performing or under-utilised properties or ones located in less desirable locations, is to lease space long term to co-working operations.
Halvitigala says this option can bring credibility to a property and can also lower tenant impact and fit-out costs, but the landlord has less control over end use of the property.
The other major option is for landlords to enter the co-working market directly by developing their property into their own co-working space.
Halvitigala says this allows landlords to capitalise on a different market segment that wasn’t utilised and to benefit from the ability to maximise space with multi-tenants.
“But it does mean they will have to invest capital on building upgrades and redesigns. They also need to think about leases differently and generally be more flexible and adaptable.”
They have found that landlords have been cautious in accepting this new work space phenomenon, but there are advantages if they enter into this niche market, she adds.