Colliers International Workplace Report 2014

Colliers International Workplace Report 2014

Elbows in – the squeeze is on at work. The latest biennial workplace report on occupational trends in CBD office markets by Colliers International shows tenants are squeezing in more workers than in previous years as rents begin to rise in most major markets.

October, Thursday 23, 2014. The latest Colliers International workplace report shows there has been a significant increase in occupational density among most CBD workplaces in the last two years. The report which covers leases entered into between August 2012 and July 2014 covers more than 186,000m² and 11,370 employees.

However, there has been a significant variance in the overall results by location, sector and grade, according to national director of research and consulting, Alan McMahon.

Nationally, density edged higher, with 16.4m² per workstation compared to 17.1m² per workstation in 2012.

“The drive for less space per workstation implemented by tenants to increase efficiency and reduce overall costs is unsurprising, but some sectors have stood out from the others,” says McMahon.

“Typically the market focuses on efficiencies in higher graded premises, however, nationally B and C grade buildings also reported increasing density.”

Density in this survey could have been higher but a constraint to increasing density in these B and C grade premises is the poorer quality of facilities such as lifts, air conditioning and even the number of toilets.

“Herein lies the lesson for landlords,” says McMahon.

“The research shows that it is not just about being focussed on the rent per square metre – it’s also very much about considering the rent per person. And this may involve upgrading the building facilities.”

“The report clearly shows that the buildings, and by default, landlords, which have catered for this increase in occupational density, will have superior or upgraded facilities and services.”

“In order to capture the tenants looking for these efficiencies, landlords have to consider the services of these buildings as much as their physical attributes and appearances”.

Office density in Auckland reduced from 16.6 m² per workstation in 2012, to 16.8 m². However, if legal sector leases are excluded, the density is much higher, at just 14.8m² per workstation.

“In this survey, there were a number of high profile leases predominantly in A grade buildings to legal firms. Premises occupied by the legal sector typically have a higher number of private offices, which can influence the overall density results.

“If we exclude the legal sector, there has been a drop of more than 10% in space per person over a two year period. This is one of the largest increases in density we have recorded in such a short space of time since our survey began in 1998,” says McMahon.

“Given rents haven’t risen as much, this has assisted tenants in their total occupancy costs, but that may be about to change, noting recent Prime Auckland CBD office rental forecasts of between 5% and 6% over the next couple of years.”

This is also likely to be a significant consideration for Christchurch which has experienced a jump in rents of around 30%.

“By increasing density by an equivalent 30%, or from 20.6m² (the benchmark we most recently measured in 2010) to 14.4m² per workstation, will provide for similar overall occupancy costs in Christchurch before the earthquakes, but with a much higher quality of premises”.

“Efficient occupation of large floor plates in new buildings is a key to unlocking affordability to tenants returning to the CBD. It is feasible for tenants to incur similar cost per person while paying the higher rents that are required to trigger construction” says McMahon.

In Wellington, CBD office density in 2014 has increased to 16.4m² per workstation compared to 17.5m² per workstation in 2012.

The broadly stable overall result masks the significant shift in workplace strategy occurring between the public and private sector in Wellington CBD.

“The biggest shift in density and total occupancy costs (TOC) in the 2014 report has been in Wellington CBD’s public sector. Density has increased from 17.2m² per workstation to 13.4m² per workstation. TOC has decreased from approximately $7450 per workstation in 2012 to $4450 in 2014, a saving of approximately 40%”.

Office density in the private sector in Wellington is at 18.7m² per workstation in 2014 compared to 17.7m² in 2012. Occupancy costs have remained broadly stable at just under $6500 per workstation.

“Given that the government occupies just below 40% of the occupied office market in Wellington’s CBD, supply and demand dynamics are expected to be altered in the future as more leases at higher density rates are undertaken”, says McMahon.

Ends.

www.colliers.co.nz

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