Research & Forecast Report New Zealand 14 Workplace Report Occupational trends across New Zealand Accelerating success.
Introduction In the seventh edition of our biennial CBD office workplace report, data for leases entered into between August 12 and July 14 have been analysed in Auckland, Wellington, Hamilton, Christchurch and Dunedin. Reflecting the tighter market conditions since our last report, the sample size covers 186,768m² and 11,367 employees, compared to 3,015m² and 18,672 employees in 12. We have analysed the results of more than 360 leases individually, and where necessary we have eliminated the outliers to keep the results meaningful and robust. The presentation of the dataset has been grouped to avoid individual transactions being recognised. In this report, please note that higher density means less space per workstation, and lower density means more space per workstation. Colliers International is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and collaboration, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. We represent property investors, developers and occupiers in local and global markets. Our expertise spans all property sectors - office, industrial, retail, rural and agribusiness, healthcare and retirement living, hotels and leisure. 2 New Zealand Workplace Report 14 Colliers International
Results by region Survey period Office density (m 2 / workstation) TOC* per workstation % TOC Private per m 2 offices m 2 Sample size Workstations 08-16.1 $8571 $531 6.0% 163,764,150-12 16.6 $8662 $521 4.4% 139,661 8399 12-14 16.8 $8956 $533 13.8% 65,098 3875 12-14** 14.8 $7008 $473 4.1% 44,043 2971 AUCKLAND Survey period Office density (m 2 / workstation) TOC* per workstation % TOC Private per m 2 offices m 2 Sample size Workstations HAMILTON 08-15.4 $3572 $232 14.3% 9867 642-12 17.2 $4609 $268 4.3% 15,937 927 12-14 14.5 $3373 $232 6.3% 15,674 78 Survey period Office density (m 2 / workstation) TOC* per workstation % TOC Private per m 2 offices m 2 Sample size Workstations WELLINGTON 08-14.4 $7054 $491 4.0% 173,007 12,043-12 17.5 $7214 $413 5.2% 159,708 9150 12-14 16.4 $5649 $345 5.0% 1,116 6179 CHRISTCHURCH See page 8 for comments. DUNEDIN Survey period Office density (m 2 / workstation) TOC* per workstation % TOC Private per m 2 offices m 2 Sample size Workstations 08-27.4 $5493 $0 7.5% 7674 280-12 24.0 $5036 $2 6.6% 4708 196 12-14.8 $5138 $247 6.0% 4880 235 * ** Excluding legal sector 3 New Zealand Workplace Report 14 Colliers International
(m 2 /workstation) National CBD office density versus total occupancy cost per workstation by grade : 12 14 14 (excl. legal sector) TOC per workstation: 12 14 14 (excl. legal sector) 18 16 14 12 National CBD office density by grade - 14 Proportion of private offices (m²/workstation) Premium Grade 18 17 16 15 14 13 12 11 Premium Grade A Grade B Grade C Grade Overall National office density National office density (excl. legal sector) National CBD office proportion of private offices per workstation by grade 25% % 15% % 5% 0% 12 14 14 (excl. legal sector) Premium Grade A Grade B Grade C Grade Overall A Grade B Grade C Grade Overall $12,000 $,000 $8000 per workstation National results Higher density nationally Overall density in the four regions monitored edged higher, with 16.4m² per workstation compared to 17.1m² per workstation in 12. The drive for less space per workstation implemented by many tenants to increase efficiency and reduce overall costs is unsurprising. However, there has been a significant variance in the overall results by location, sector and grade. Legal sector decreases prime sector density In the prime sector (premium and A grade), lower density was recorded in 14 when compared with 12 and results. This bucks the overall results and market sentiment towards greater space utilisation efficiency in our CBD markets. However, in contrast with previous surveys, there was a high number of large legal firm leases recorded, which typically have a higher number of private offices. Given the greater floor space usage by private offices, density is impacted. By way of example, in the premium sector the proportion of private offices to employees increased to 21.6% in 14, compared to 2.9% in 12 and 4.3% in. If the legal sector leases are excluded, the proportion of private offices in premium and A grade space reduce significantly, to 2.9% and 3.7% respectively. This also increases density to 13.2m² and 15.0m² per workstation in premium and A grade sectors respectively. Efficiency driven by the secondary sector Density increased among Auckland CBD office tenants in B and C grade in the sample. The majority of B grade leases were transacted in high quality B grade buildings in the CBD Core with few private offices. Businesses with call centres, which typically require less space per employee than other uses, increased the density in C grade space. This highlights that location and industry type still play a significant role in a business s leasing strategy. Government ramps up its efficiency The government s mandate to increase workplace efficiency and keep costs down is working. This is most notable when the national results are split by private and public sector leases. Although nationally private sector density was lower at 17.9m² compared to 17.0m² per workstation in 12, the public sector has increased its density from 17.4m² per workstation in 12 to only 13.9m² in 14. 4 New Zealand Workplace Report 14 Colliers International
The increased density and the higher number of public sector leases taking place in lower grade space has also reduced public sector total occupancy costs (TOC) significantly between survey periods. While and 12 TOC were similar at approximately $7450, this has reduced to $4450 in 14, a saving of approximately 40%. In contrast, private sector TOC results have remained steady since at just over $7700 per workstation. This result is across all grades. The current trend in public sector results is likely to be a dominant feature in any upcoming lease agreements, a factor that may significantly influence market dynamics across New Zealand. Greater efficiency in larger workforces, but smaller entities catching up Analysis of leases by size shows businesses of more than 0 workstations typically achieve the highest density ratings. This is a regular feature of CBD office markets in recent years, with the 14 density at 14.1m² per workstation compared to 14.9m² and 14.2m² in 12 and respectively. While density in smaller businesses is not as high, significant gains in density have been achieved over the last two years. In small to medium sized businesses representing up to workstations, which make up the majority of New Zealand s enterprises, density has increased to 25.7m² per workstation, a contraction of 3.2m² per workstation in the last two years. Businesses with 21-0 workstations contracted by 3.3m² per workstation, now at 17.6m². Greater efficiency, lower costs The ability of businesses to increase their density has captured greater total cost savings. Smaller sized businesses with up to workstations showed TOC reduced by over $350 per workstation between 12 and 14, and $ per workstation for business with between 21 and 0 workstations. Density rates in large businesses remained steady, while TOC reduced; down by $1600 per workstation between 12 and 14. This signals that tenants looking to save costs should not only focus on density, but on the quality of the overall package on offer including rental rates, operating costs, car park costs and naming/signage right costs. (m 2 /workstation) (m 2 /workstation) National CBD office density versus total occupancy cost per workstation by sector : 12 14 TOC per workstation: 12 14 18 16 14 12 Private Sector National CBD office density versus total occupancy cost per workstation by business size : 12 14 TOC per workstation: 12 14 35 30 25 15 5 0 Up to workstations 21-0 workstations Public Sector 1+ workstations $8000 $7000 $3000 $00 $00 $0 $12,000 $,000 $8000 $00 $0 per workstation per workstation 5 New Zealand Workplace Report 14 Colliers International
Results by geographic location Auckland CBD office Overall, office density in Auckland CBD reduced to 16.8m² per workstation compared to 16.6m² in 12. Total occupancy costs (TOC) remained broadly in line with previous surveys at just under $9000 per workstation. This indicates rents per square metre of CBD office space are increasing, supported by our rental evidence in the national CBD office surveys. The catalyst behind the reduced density in the premium and A grade sectors were large legal firm leases signed over the two year survey period. Density has decreased from 17.0m² and 14.1m² to 17.4m² and 16.2m² per workstation for premium and A grade sectors respectively. This impacted TOC per workstation in both grades, which have both increased. in B grade office space in 14 returned to levels, reporting 16.9m² per workstation. The major cause of the increase in density was due to many of the leases taking place in high quality B grade buildings in the CBD Core with limited private offices. The greatest driver in overall office density was in C grade leases, increasing to 16m² per workstation from 19m² in 12. Call centres, which typically require less space per employee than in many other roles, influenced the result. Historical observations of the Auckland CBD workplace report show that office density has increased since 1998, but reduced marginally since the low point in 08. This was a reflection of tight market conditions leading up to 08 with superfluous office space due to the global financial crisis thereafter. Given rental costs are expected to increase further, tenants will need to consider the implication of density on TOC in long-term financial planning. Auckland CBD office density versus total occupancy cost per workstation by grade : 12 14 14 (excl. legal sector) TOC per workstation: 12 14 14 (excl. legal sector) Historical Auckland CBD office density versus total occupancy cost per workstation (m 2 /workstation) Excluding legal sector TOC per workstation (m 2 /workstation) 19 18 17 16 15 14 13 12 Premium Grade A Grade B Grade C Grade Overall $12,000 $,000 $8000 per workstation (m 2 /workstation) 22 18 16 14 12 9500 21.0 9000 8500 18.7 8000 17.7 16.6 16.8 7500 16.1 15.6 7000 14.8 6500 6000 5500 5000 1998 00 04 08 12 14 14* * Excluding legal sector per workstation 6 New Zealand Workplace Report 14 Colliers International
Wellington CBD office Wellington CBD office density in 14 has increased to 16.4m² per workstation compared to 17.5m² per workstation in 12. Wellington CBD office density versus total occupancy cost per workstation by grade : 12 14 TOC per workstation: 12 14 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 14 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 12 to $4450 in 14, a saving of approximately 40%. in the private sector in Wellington is at 18.7m² per workstation in 14 compared to 17.7m² in 12. 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. by grade in 14 was comparable to 12. A grade density was the lowest at.4m² per workstation. This was a reflection of the high proportion of smaller businesses leasing space. B grade density was at 15.4m² per workstation and C grade was 17.8m² per workstation. The limited change in total occupancy costs (TOC) per workstation between 12 and 14 reflects the overall stability in density rates and rental costs. (m 2 /workstation) (m 2 /workstation) 25 15 5 0 Wellington CBD office density versus total occupancy cost by sector 25 15 5 0 Premium Grade A Grade B Grade C Grade Overall : 12 14 TOC per workstation: 12 14 Private Sector Public Sector $12,000 $,000 $8000 $00 $0 $12,000 $,000 $8000 $00 $0 per workstation per workstation 7 New Zealand Workplace Report 14 Colliers International
Hamilton and Dunedin CBD office Hamilton s CBD office market experienced an increase in office density from 17.2m² per workstation in 12 to 14.5m² per workstation in 14. New premises constructed in Hamilton over the last two years have enabled greater use of alternative workplace strategies (AWS) including activity based working (ABS). While higher than other areas surveyed, office density rates in Dunedin s CBD continue to increase, currently at.8m² per workstation compared to 27.4m² in. Refurbishment and re-configuration of older stock has provided greater efficiencies in space utilisation. Despite this higher density rating, costs per workstation remains stable, indicating pressure on occupancy costs to increase in Dunedin in the short term. Hamilton and Dunedin CBD office density versus total occupancy cost per workstation Hamilton density Dunedin density Hamilton TOC per workstation Dunedin TOC per workstation (m 2 /workstation) 30 25 15 5 0 12 14 $5000 $3000 $00 $00 $0 per workstation Dunedin Christchurch overview The Christchurch CBD office market is still in the early stages of recovery. Accordingly, it is not possible to provide accurate analysis of workplace density. However it is clear that tenants in the new buildings are adopting more efficient workplace utilisation than recorded in our report in, which was at.6m² per workstation. Since February 11, 22,800m² of office accommodation has been completed in the west and core of the CBD together with Victoria St Gateway. There is also 114,000m² currently under construction with confirmation of a further 34,000m² to be constructed in the short to medium term. Given the desire for the central city to accommodate 15,000 employees by 16, office density will need to be at least comparable to Auckland and Wellington CBD once development and occupational activity settles. Trying to offset the higher rent and operating costs for new buildings, which have increased by approximately 30% since February 11, by increasing density by an equivalent 30%, or from.6m² to 14.4m² per workstation, will provide for similar overall occupancy costs. 8 New Zealand Workplace Report 14 Colliers International
Summary tables Auckland CBD office Overall by year (m²/workstation) Total occupancy cost per workstation Auckland CBD office (excluding legal sector) ($/m²) Proportion of private offices 1998 21.0 $7558 $361 23.0% 00 18.7 $5641 $302 16.0% 04 17.7 $6139 $346.0% 08 15.6 $8065 $477 3.5% 16.1 $8571 $531 6.0% 12 16.6 $8662 $521 4.4% 14 16.8 $8956 $533 13.8% By grade Premium Grade 17.4 $11,176 $644 21.6% A Grade 16.2 $7744 $477 8.6% B Grade 16.9 $7577 $449 6.9% C Grade 16.0 $5836 $365 4.6% By sector Private Sector 16.7 $8973 $536 14.3% Public Sector 17.9 $8674 $486 4.7% By size of organisation Up to Workstations 22.7 $,916 $481.8% 21-0 Workstations 17.4 $84 $483 8.6% 1+ Workstations 15.3 $8983 $588 18.1% Overall results (m²/workstation) Total occupancy cost per workstation ($/m²) Proportion of private offices 14 14.8 $7008 $473 4.1% By grade * Excludes organisations with fewer than five employees Premium Grade 13.2 $7871 $596 2.9% A Grade 15.1 $7038 $467 3.5% B Grade 16.3 $7144 $439 7.1% C Grade 16.0 $5836 $365 4.6% 9 New Zealand Workplace Report 14 Colliers International
Wellington CBD office Overall results Hamilton and Dunedin CBD office New Zealand CBD office National results (m²/workstation) Total occupancy cost per workstation New Zealand CBD office (excluding legal sector) ($/m²) Proportion of private offices Overall 16.4 $6550 $399 8.2% By grade Premium Grade 17.4 $11,176 $644 21.6% A Grade 17.0 $8299 $487 9.5% B Grade 15.6 $5442 $349 3.9% C Grade 17.2 $5184 $302 7.2% By sector Private Sector 17.9 $7732 $433.6% Public Sector 13.9 $4450 $3 3.8% By size of organisation Up to Workstations 25.7 $9455 $368 12.7% 21-0 Workstations 17.6 $6889 $392 7.0% 1+ Workstations 14.2 $5844 $413 5.9% National results (m²/workstation) Total occupancy cost per workstation ($/m²) Proportion of private offices Overall 15.6 $5700 $364 4.6% By grade (m²/workstation) Total occupancy cost per workstation ($/m²) Proportion of private offices Overall 16.4 $5649 $345 5.0% By grade Premium Grade - - - - A Grade.4 $,961 $538 12.1% B Grade 15.4 $5734 $372 3.1% C Grade 17.8 $4991 $280 7.9% By sector Private Sector 19.0 $6588 $348 6.0% Public Sector 13.4 $4578 $341 3.9% By size of organisation Up to Workstations 28.4 $9248 $326 13.1% 21-0 Workstations 17.4 $6045 $347 5.9% 1+ Workstations 13.5 $4754 $351 3.0% Overall results (m²/workstation) Total occupancy cost per workstation ($/m²) Proportion of private offices Hamilton 14.5 $3373 $232 6.3% Dunedin.8 $5138 $247 6.0% Premium Grade 13.2 $7871 $596 2.9% A Grade 15.0 $7091 $473 3.7% B Grade 15.4 $5369 $348 3.7% C Grade 17.1 $5173 $302 7.1% New Zealand Workplace Report 14 Colliers International
Definitions and methodology is defined as the space (square metres) per workstation and is calculated on a net lettable area basis. A higher office density means less space per workstation. The property cost of leasing net lettable space. For the purposes of our survey, this includes rental, operating expenses and car parking costs. Other property costs such as furniture, information technology and utilities are excluded. Leasing incentives such as rent free periods and fit out contributions are excluded. Where fit out rental or other improvements rental is payable, this is included in the total occupancy cost. Market coverage With the exception of the 1998 survey which looked at the broad market existing at that time, all subsequent surveys have concentrated on the relatively short periods between surveys. This can produce quite variable results but in combination provide medium term trend guidance. In terms of area, this survey only includes the CBDs of the nominated cities in New Zealand. Organisations with five staff or less are excluded. Grading So that the best buildings in Wellington can be compared with the best buildings in Auckland, we have categorised some Wellington buildings as Premium grade. In our other research, which uses building grades to help provide guidance on value, vacancy and stock, we do not classify any Wellington buildings as Premium grade. That premium classification is solely for comparison purposes of this survey. 11 New Zealand Workplace Report 14 Colliers International
368 offices in 62 countries on 6 continents United States: 140 Canada: 42 Latin America: Asia Pacific: 81 EMEA: 85 $2 billion in annual revenue For more information contact: Alan McMahon National Director, Research & Consulting Chris Dibble National Research Manager Nina Zhang Research Analyst Claire Burns Research Support Colliers International Level 27, SAP Tower 151 Queen Street Auckland TEL +64 9 358 1888 1.12 billion square feet under management 4532 professionals and staff Download the Colliers ANZ ipad app from the AppStore About Colliers International Colliers International is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and a shared sense of initiative, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. We connect through a shared set of values that shape a collaborative environment throughout our organization that is unsurpassed in the industry. That s why we attract top recruits and have one of the highest retention rates in the industry. Colliers International has also been recognized as one of the best places to work by top business organizations in many of our markets across the globe. colliers.co.nz Whilst all care has been taken to provide reasonably accurate information within this report, Colliers International cannot guarantee the validity of all data and information utilised in preparing this research. Accordingly Colliers International New Zealand Ltd, do not make any representation of warranty, expressed or implied, as to the accuracy or completeness of the content contained herein and no legal liability is to be assumed or implied with respect thereto. All content is Copyright Colliers International New Zealand Ltd 14 and may not be reproduced without expressed permission.