Flexible workspace forges ahead in times of economic restraint

Tuesday, 4 February 2025

Flexible workspace giant IWG’s latest offering is in the $650 million 50 Albert Street building in central Auckland.

Over half of the flexible workspace on offer in New Zealand’s most expensive new office block has been snapped up since it opened in November, and the rest is expected to go quickly.

The high demand is a sign of changing times for the office sector, its provider, International Workplace Group (IWG) says.

Global flexible workspace giant IWG’s latest offering is in the old New Zealand Herald building at 50 Albert St in the heart of Auckland’s CBD. Its third New Zealand location under its Spaces brand takes up the seventh storey of the building.

The workspace, which clients buy into through a membership plan, is a mix of private offices, meeting rooms, open plan co-working desks, and communal facilities, such as lunch areas and a reception.

IWG’s Alex Sykes says many companies now want more flexibility in leasing and size than traditional office tenancies allow.

A Spaces’ membership also provides access to the building’s gym, meeting rooms, and conference facility, and to IWG’s national and global network of flexible workspaces.

IWG New Zealand country manager Alex Sykes said there had been strong demand for the space from the word go, with more than 50% already leased despite the quiet summer holiday period, and he expected it would be full within six months.

That was a rapid take-up, and demonstrated the appeal of flexible working spaces in tough economic times, and as ways of working changed, he said.

“Taking permanent office space means locking in three or five-year leases for a defined footprint, but many companies now want more flexibility in leasing and size. They want to be able to scale their space up or down as required.”

Many companies were also reluctant to pay for fit outs or capital expenditure due to the costs these days, he said.

“Instead they want to lease somewhere that is turnkey and ready to go. Good office space with no capital outlay is very attractive, and that is particularly true for smaller businesses and start-ups. If they can avoid capital expenditure it really helps.”

Flexible working space ticked both boxes, as a company could lease a few desks or a small private office initially, and then move into an office, or lease desks on top of the office as they built up the business.

Flexible workspaces offer office options to SMEs that they might not otherwise have, Sykes says.

“There’s lots of companies that start up in New Zealand, and don’t know how big they will be. They might contract 1000sqm but only have a few staff to start, and this offers another, more cost-effective option.”

Sykes said another key factor in the growing demand for flexible workspace was the change in the ways people worked, and the switch towards hybrid working.

It was not just the government that was encouraging employees to return to the office, globally the corporate sector was pushing to move away from working at home all the time, he said.

“Companies want employees back at work to build their teams more effectively, to network, and communicate in a way that sparks innovation, and to provide younger employees with mentors to watch and learn from.

“But if people are returning to the office they want good office space and facilities, with nice views and proximity to transport links, and shopping and entertainment options.”

That was why there was an ongoing “flight to quality” in the office sector, and it was something flexible workspaces could provide at a lesser cost than taking up a permanent lease in a prime building.

It was a particularly good option for SMEs, and 90% of the companies that would lease in Spaces would be SMEs, which was representative of their presence in the New Zealand economy, he said.

Spaces hosts events for members, and helps them to arrange their own, to help build community.

“The companies using our space would not be able to lease in a building like this otherwise, but being in this building, in this location is good for their brand and their business, and it attracts employees.”

“Socialising and making connections with colleagues and peers is an important part of work life, and people often go to flexible workplaces because working from home can be lonely and isolating.”

To help with that and to build a sense of community among its members, Spaces held regular events, such as seminars and functions, and it also offered assistance to members who wanted to organise their own events, such as product launches.

Over recent years, some high-profile flexible working space providers, such as Digital Nomad and The Settlement in the Wellington region, have failed.

But IWG, which has more than 4000 locations in more than 120 countries worldwide, has plans to expand.

It currently has 15 locations in New Zealand across its Regus, Spaces and Biz Dojo brands, but aims to grow to more than 50 locations around the country over the next five years. Its next location is scheduled to open at 125 Queen St early this year.

Sykes said New Zealand had been slow to embrace the concept of flexible workspaces, but demand had taken off now, and the move to different models of working had contributed to that.

“Using flexible workspace is a different way of working, but it gives many companies options, and access to the type of office space and locations they would not otherwise have.”

In March last year, a report into the sector by Sharedspace.co.nz, an online marketplace for shared workspace, found there were 194 co-working spaces in New Zealand, and that despite the challenging environment most reported strong demand and inquiries.

It also found that, at the time, 56% of co-working space providers planned to expand their businesses, and Sharedspace.co.nz founder Matt Knight said the more adaptable providers were thriving.