Big businesses are quickly realizing the benefits that the new office leasing co-working phenomenon brings which has led to the amount of Auckland office space occupied by this segment of the market almost doubling in just 12 months
Big businesses are quickly realizing the benefits that the new office leasing co-working phenomenon brings which has led to the amount of Auckland office space occupied by this segment of the market almost doubling in just 12 months, according to a new Bayleys Research report.
Co-working – at its most basic the renting of shared office space and facilities – has long been the norm for tech start-ups and creative companies. But the concept is now also attracting a more diverse range of corporate tenants wanting to tap into the start-up culture, cultivate innovation and win new talent and clients.
Recent analysis by Bayleys Research shows the co-working scene in Auckland is expanding rapidly, with more than 28,000 sqm of office space, up from 15,000 sqm last year. This has resulted in the number of co-working members increasing from approximately 1,500 to 3,300. 76 percent of the space is operated by two companies – Generator and BizDojo – with 17 other operators making up the balance.
An additional 14,500 sq m of co-working space will be up and running by 2018 with the 11,000 sq m B: Hive building at Smales Farm in Takapuna, and Kiwi Property Group announcing its new office development at Sylvia Park will have a full floor occupied by operator BizDojo.
Spaces, a Regus company, have also signed up to 2,700 sqm at 501 Karangahape Rd. This will push the total number of co-working members to just under 5,000 by 2018.
Director commercial, retail and operations at Bayleys, Lloyd Budd, presented the latest research findings to CoreNet members, an association for corporate real estate professionals this month, at Auckland’s newest purpose built co-working premises - GridAKL/12 Madden Street in Wynyard Quarter’s Innovation Precinct.
Mr Budd said most of the larger co-worker property operators were looking to expand their offerings and believed there was considerable scope to broaden the current reach from the ‘entrepreneurial-creative’ sectors to the more lucrative corporate sector.
“For the corporate sector, working alongside energetic start-ups and techies gives them direct access to a customer base and ideas that might otherwise be out of reach,” Mr Budd said.
Generator, owned 50 percent by Precinct Properties, newest 8,000 sqm lease deal at Grid AKL/12 Madden St is the latest example of the co-working sector’s growth. This vision has been made possible by the head lease holder Auckland Tourism Events & Economic Development (ATEED) and the building is also owned by Precinct.
This makes Generator the largest co-working operator in Auckland. BizDojo - the second largest sector landlord in Auckland, but the largest overall in New Zealand - also operates in Wellington and Christchurch, and has recently announced a new site at 5 Mile in Queenstown.
Auckland Mayor Phil Goff said in June this year that ATEED’s GridAKL initiative – part of the wider Auckland Innovation Precinct in Wynyard Quarter – showed that co-working played an important role in driving growth of the region’s technology sector, with 9,000 jobs added in the last five years and nearly 26 percent growth in the tech sector’s gross domestic product (GDP).
Mr Budd said that the “millennial demographic” was the key driver underpinning co-working floorspace growth.
“Over the next five years, millennials will be the fastest growing age demographic – contributing about 70,000 people to Auckland’s workforce,” he told the more than 120 attendees at the CoreNet event.
“Conservatively, the demand for co-working space could potentially rise more than eight-fold over this period if current global trends continue.”
The Bayleys research highlights that most of the current Auckland co-working offerings are centred in the Auckland CBD and city fringe - with the largest cluster in and around the Waitemata harbourside close to a wide variety of amenities and public transport connections.
The report noted that in Auckland, the average monthly desk rate is around $800 for quality dedicated co-working space, but the market ranged from $400 per month to $1,499 per month - depending on the menu of services, location, quality, facilities and other factors.
Mr Budd, who has followed the co-working scene in his time working for Barangaroo South developer, Lend Lease in Australia and more recently in New Zealand with Bayleys, said there was an immense drive for building owners to keep relevant in the face of disruption from new trends such as co-working and the new ‘gig-economy’ being driven by the growing millennial workforce.
“The move away from the traditional corporate style of employment, towards an innovative, entrepreneurial and freelance style of work these days, means co-working has not only become the new way to work, but it is also the new way for landlords to lease space and potentially increase revenue,” he told the CoreNet attendees.
“Landlords who understand that co-working operating models can profitably, lease space at ‘co-working appropriate’ rates - which may sit outside of normal rent per square metre rates for more traditional office tenants.
“The sector has innovated and driven in new density standards through custom built spaces as well as a better understanding of the product customers want and smarter design solutions,” said Mr Budd.
The Bayleys report also noted that density in office space occupied by co-working members had increased over the past year - from a ratio of one member per 10.3sqm to one per 8.6sqm, a 17 percent increase in floor space efficiency.
There are close to 14,000 co-working spaces around the world, according to the global online co-working group Deskmag’s latest global survey with that number expected to keep growing. In their 2017 survey, two out of three co-working spaces intended to expand their floor area.