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News Release

Auckland

Honey, they shrunk the workplace


 

 

Grey Lynn office unit decked out for summer/new-zealand/en-gb/news/864/grey-lynn-office-unit-decked-out-for-summerAucklandGrey Lynn office unit decked out for summer
East Tamaki gem with new five-year lease/new-zealand/en-gb/news/863/east-tamaki-gem-with-new-five-year-leaseAucklandEast Tamaki gem with new five-year lease

​Rising rents, scarcity of space and modern work practices are forcing multi-national organisations to rethink the way they do business. As a result, some large New Zealand occupiers are exploring the suitability of alternative workplace strategies and embracing the international macro trend toward reducing their occupier footprint and consolidating into larger floor plates.

According to CoreNet and JLL research in the United States, the average office density for Class A offices in 2001 was 28sqm per person. Today, this ratio is approximately 16sqm per person and it is still contracting quickly. Most of JLL's large corporate clients in the US are now pushing for densities closer to 14sqm per person and lower, and this trend remains the same for Asia Pacific.

JLL's office market experts, National Director of Markets and COO, Mark Grant, and Head of Integrated Portfolio Services, Kane Goulden shared their expectations for the office leasing markets in New Zealand. When asked what they think are the key drivers that are causing corporate occupiers to optimise their footprints, they described them to be the strong continuation of occupier demand that is driving rental growth, the decline in vacancy in Auckland's office market and an attempt to drive workplace and efficiencies.

JLL researchers are forecasting a further 9% increase in average net effective office rents for Grade A space in Auckland CBD by December 2015. Research recently undertaken by JLL on the office supply pipeline found that there is actually very little supply likely to be complete until 2018 and space that is coming into play before this period is almost all preleased.

Grant says, "Last year was a record in terms of the take up of office space in Auckland. Absorption of office space from December 2013 to December 2014 was approximately 69,500 sqm in the Auckland Region and that is the biggest annual take up JLL has ever recorded."

He adds, "With the supply pipeline still a while away, the lack of available office space and rising of rents are among the many challenges that organisations are facing in today's current commercial property market. Vacancy across Auckland's office market is swiftly declining, and, with the cost of moving often prohibitive and a growing headcount, the only real option for businesses is to reconfigure their space to accommodate for expansion."

There is an increased push toward increasing density in almost every industry and market but JLL has observed that this is most prevalent across consultancy, finance, law and accounting sectors in New Zealand.

Goulden says, "The time is ripe for workplace change in New Zealand and we are seeing this macro trend in large corporates who are implementing more efficient space solutions to facilitate business expansion when the cost of moving is prohibitive, or with the case of Auckland, where there are no alternatives available. A successful workplace strategy not only helps companies reduce their occupancy costs and space requirements, but 61% of companies now look to their workplace to increase employee productivity, staff satisfaction and retention, thereby creating a culture ready to adapt to future business evolutions."

New Zealand continues to experience economic growth at a faster pace than Australia. At Q4 2014 the annual GDP growth was 3.3% for NZ and 2.7% for Australia according to statistics New Zealand. Tenants suffering from a lack of space due to an expanding business are going to have to embrace this macro trend. JLL predict that occupiers are going to be 20% more efficient in their workplace footprint in the next 10 years. Goulden believes this is a structural shift not a temporary condition and expects the downward trend on space needs per person to continue.