Impending boost for Auckland co-working space

11:52 AM Wednesday May 22, 2019 True Commercial

Smales Farm’s B:HIVE opened its second stage this year. Photo / Supplied

Auckland's co-working office space sector is about to get a major international injection, as revealed in Bayleys fourth annual co-working report, the first to start tracking trends in the sector in 2016.

The US$2.6 billion (NZ$3.97 billion) Switzerland-based IWG-owned Regus company Spaces, which has taken leases over several buildings in Auckland's CBD, will open its new

co-working spaces in a couple of months, while US$47 billion (NZ$71.88 billion) US-based WeWork is attending a CoreNet Global conference next week in Auckland to discuss plans.

The Spaces' leases at 155 Fanshawe St, 501 Karangahape Rd (above Tesla) and two floors in Commercial Bay will add more than 1000 desks to Auckland's co-working space – increasing capacity by about 20 per cent.

Lloyd Budd, Bayleys commercial and industrial director and co-working specialist, said co-working desks make up about 2 per cent of Auckland's office space. That’s less than half of three years ago with Spaces and WeWork's entry into the market expected to give the sector acceptance as a mainstream office alternative.

Although Auckland's figures are well below established super cities where co-working office space makes up 5 to10 per cent of overall office space, Bayleys’ report shows Auckland's co-working spaces increased by about 9792sq m to 39,598sq m last year, and the market could absorb a lot more.

Growth is expected to continue with 17,160sq m of CBD stock in the pipeline for 2020, with a further 21,600sq m expected to be delivered by 2022.

True Commercial - Generator co-working lounge, Britomart.jpg

Generator co-working space will be repositioned at the upper end of the market. Photo / Supplied 

Co-working space occupancy levels are high, at 81.3 per cent – with 3864 desks currently occupied across Auckland. While traditional prime office vacancies are below 5 per cent, the co-working sector needs vacancy to accommodate the rapid growth of its member base.

Auckland's co-working sector is dominated by Generator, B:HIVE and BizDojo, which have more than 75 per cent market share.

Among significant changes last year was the sale of Generator to Precinct Properties for $14m and BizDojo’s sale to IWG for an undisclosed amount. It is understood that Precinct plans to reposition the Generator brand at the upper end of the co-working market, while IWG will continue to use the BizDojo brand for tech’ start-ups and innovation members.

Smales Farm-owned and operated B:HIVE opened its second stage this year and added about 800 co-working desks to its offering. This has attracted corporates such as ANZ and Deloitte, which have taken memberships.

The B:Hive's site has also been significantly upgraded with the opening of Good Side, a dining and entertainment precinct that is attracting customers from across the North Shore.

“Co-working has long been the norm for tech start-ups and creative companies, but it is now also attracting a more diverse range of corporate tenants seeking to tap into the start-up culture, cultivate innovation and win new talent and clients,” Budd says.

“The biggest trend had been the move to enclosed offices. Companies want identity with their signage on the space, privacy, security and a sense of ownership for staff,” he says.

“While this could be perceived as a return to the traditional office, in theory people in co-working space only spend a third of their time in the enclosed office and the rest outside the office or in the meeting, boardroom and cafe space.”

While desk rental rates are consistent, Budd says there could be changes when further stock comes to market in the middle of next year as the major operators establish their brand positioning.

In Auckland, the average monthly desk rate is about $800 to $1000 for quality dedicated co-working space; but the market ranges from $400 per month to $1500 per month, depending on the range of services, location, quality, facilities and other factors.

The rapid growth in the sector has been a phenomenon not only in Auckland but globally for several years, with flexible work spaces covering 48m sq m of real estate worldwide.

WeWork has offices in 280 locations, spread across 86 cities in 32 countries and Spaces has leases in 180 locations across 50 countries.

Co-working space companies generally lease commercial real estate, redesign it for shared office space including business services and amenities, such as meeting areas, cafes and boardrooms, and sell memberships.