The future is flexible for Australian corporate occupiers
More than half of corporate occupiers across Australia and New Zealand plan to reduce their footprint of traditional leased office space in the next two years, as their portfolios shift towards flexible workspace solutions.
This was a key outtake from CBRE’s Pacific Corporate Coworking Survey: The Future is Flexible report, which surveyed 60 large occupiers across Australia and New Zealand on their current and future planned use of third-party flexible space, with a focus on coworking and meeting and event spaces.
In Australia, the flexible workspace industry occupies circa 193,200 square metres of space across the six major capital cities, with 40% of occupiers currently utilising some form of flexible workspace solution.
Australia currently has the seventh largest presence of coworking operators globally at 253 operators, while New Zealand comes in 35th with 62 listed operators. The APAC region is mooted for rapid growth in the coworking space over the next five years, with China to becoming the largest market by 2022.
In the next two years, a noteworthy 58% of Australian corporate occupiers plan to reduce their traditional leased office footprint space and 55% are looking to increase coworking space use, compared to only 28% of companies that have no plans to adopt flexible workspace solutions across their portfolio.
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.
“This doesn’t imply that occupiers are looking to reduce their total office footprint, as 55% have said they intend to increase their use of coworking space in the future and 40% intend to increase their use of meeting/event space.”
Despite the growing demand for flexible solutions, only 32% of occupiers in Australia would choose to locate in a building with a coworking operator, highlighting existing concerns occupiers have around building tenant profile, lease covenants and a lack of experience co-locating with coworking operators.
Meanwhile, demand for meeting and event function space is high. 89% of Australian occupiers expressed they would choose to occupy a building that offered these facilities versus one that didn’t.
“This was particularly prevalent for the medium and smaller portfolio corporate respondents who expected to increase their use of meeting/event space more than larger occupiers in the next two years,” Spark said.
“Greater scrutiny is being placed on portfolio and cost optimisation along with space utilisation. The need for multiple, superfluous meeting rooms and big boardrooms that may not be used on a regular basis is being questioned. Additionally, these occupiers value the benefits of a premium concierge service to assist in coordinating and/or hosting events and functions.”
Source: CBRE Research
The survey also revealed that the motivation to use coworking space varied between industries.
For example, Finance & Insurance companies valued portfolio flexibility as a key reason for using coworking but gave access to a collaborative environment a lower score. Comparatively, Public Sector occupiers placed higher emphasis on the ability to access a collaborative environment and less so on meeting and event space. Technology companies, which were unsurprisingly found to be the highest users of flexible space, were motivated by the ability to adapt to changes in business processes.
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 coworking space offering to meet the different needs and preferences of industry groups.
“Today, coworking 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,” Fitzgerald said.
Source: CBRE Research
Notably, the survey found 44% of occupiers think landlords are not adapting to meet occupiers’ changing space requirements and 17% believe landlords are responding verypoorly.
“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.”
