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Most IT firms in Auckland prefer suburbia than the city for office space: CBRE New Zealand

Most IT firms in Auckland prefer suburbia than the city for office space: CBRE New Zealand

Location is often determined by the area where most employees live, says CBRE New Zealand

IT companies took up 5 per cent of all office space in Auckland last year, and was the seventh most active sector with regards to relocation to new space, according to CBRE New Zealand.

“The key drivers of change we are seeing in the IT sector’s use of space are consolidation, expansion, and relocation due to growth,” says Gergely Gaspardy, research manager, CBRE New Zealand.

Gaspardy says the three largest moves in the second half of 2013 were Dimension Data, Orion Health, and EROAD.

Dimension Data consolidated several office locations to its new HQ in the Viaduct. Similarly, Orion Health took up some additional space on the other side of the road where they have their head office already so expansion was their key driver, says Gaspardy.

EROAD, meanwhile, recently moved from a space measuring around 600 square metres, to 1,300 square metres due to extremely fast growth in recent months.

EROAD moved within Albany because that is where most of its workforce is based, says Gaspardy. “With a high growth trajectory, it is likely that the business’s space requirements will continue to change rapidly in the coming months and years.”

IT firms gravitate to suburban areas

CBRE’s research shows suburban areas are more popular with IT occupiers than the central business district (CBD) or city fringe.

It says 13 per cent (14,000 sqm) of office space is in the CBD, while just over a quarter, 27 per cent (29,500 sqm) is located in the CBD fringe. The majority (60 per cent) of IT offices are in Auckland’s suburban areas.

Grafton, Greenlane, Albany and Takapuna are the most occupied suburban areas, with some 3,000 square metres of ‘Grade A’ space occupied in Greenlane.

Within the central city, the CBD core is the top spot for IT firms. However, for Grade A office space, the Anzac Ave Zone is leading the way, with the Victoria Quarter and Viaduct Basin Zone offering some very good quality Grade A spaces too.

Gaspardy says that generally speaking, IT companies do not seem to have a strong preference for one particular location, contrary to law firms, the financial sector or the education sector – which all have rather clear preferences about locations.

“The location of an IT firm is in many cases determined by the area where most of the company’s workforce lives, as demonstrated by EROAD, or even where the principals of the company live.

The location of an IT firm is in many cases determined by the area where most of the company’s workforce lives, as demonstrated by EROAD, or even where the principals of the company live.

“There are 208 IT service firms occupying office space in Auckland’s CBD, city fringe and suburban areas, which is a healthy – and growing – figure. Between those 208 firms, the total occupied space is 109,000 sqm, which represents 3.5 percent of all occupied stock in the city.”

Location over quality

Gaspardy says that when it comes to quality grade, IT people are less concerned than other sectors about office grading. There seems to be more of a focus on workplace culture and informal incentives such as staff get-togethers and meals.

Read more: The CIO’s blindside

“While of course there are other organisational factors at play for the IT sector, this attitude towards office grading may be part of the reason why lower quality grade is the majority not only in the sector’s occupied stock but also in their latest demand, as we’ve seen in the second half of 2013.”

Interestingly, says Gaspardy, the majority of IT firms (157) take up to 500 sqm of office space, and only two firms occupy spaces over 5,001 sqm.

The key drivers of change we are seeing in the IT sector’s use of space are consolidation, expansion, and relocation due to growth.

Gergely Gaspardy, CBRE NZ

“Part of the reason that the majority of firms within the IT sector often require less than 500 square metres for their offices is that many IT businesses are small to medium in size, and of course the IT sector has a healthy and growing number of start-ups, probably more so than most other sectors.

“When compared to the public sector, finance and health organisations – which as a rule tend to have more staff and therefore have larger space requirements – it makes sense that the IT sector demand for office space is generally more compact in size.”

CBRE expects more movement in demand for property from the sector, citing the latest report from the Ministry of Business, Innovation and Employment that IT salaries are twice the national average, and growing faster than the average. The MBIE report also cited almost half (47 per cent of all IT services invested in expansion in 2012, compared to 33 per cent average rate across New Zealand business. This indicates an active and growing market, says CBRE.

Gaspardy says the CBD office market is emerging as the most supply-constrained over the near term, and across Auckland, high levels of confidence and strong positive sentiment are evident.

“This puts further pressure on existing stock, which is why we are seeing a raft of professional services – such as IT – moving to the suburban areas of Auckland to alleviate some of the higher costs associated with the CBD core.”

CBRE says IT firms must keep in mind the sector as a whole is growing over the next year. This will drive requirements for staff and office pace.

With expansion, consolidation and relocation due to growth influencing many firms property requirements, Gaspardy says IT business owners and managers need to be aware of the office market, locations and availability. He says this way, If and when the need for new or different space arises, the move can happen quickly, efficiently and with minimal downtime for operations and service delivery.

Read more: NZ’s digital divide: Nearly half of small and medium businesses are offline

Setting up ‘agile walls’

When software company MYOB consolidated its offices in Auckland, it chose to go open plan.

The office in Auckland’s Mt Eden was the previous home of BankLink, which MYOB acquired last year.

“When we acquired BankLink in May last year, there was no question we would want to combine our teams in one place,” explains MYOB CEO Tim Reed. “We’ve adopted the ‘lean start up’ or ‘agile’ way of doing things and that requires a greater emphasis on flexibility and team work.”

A key aspect of the design was to bring together the MYOB and BankLink cultures in one space, says lead designer Suzanne Miller of Yellow6. “We broke down the physical barriers that had been closing people off from each other and created a totally open plan community.”

Reed says this approach is reflected in the open plan workspaces and features such as the ‘agile walls’ that allow development teams to be creative and discuss ideas. “The multiple TV screens and web-cams assist collaboration with their peers in other parts of New Zealand and Australia in a real-time environment.”

Innovation is such a core thing for a technology company. Creating the environment for that is fundamental.

Adam Ferguson, MYOB

Adam Ferguson, Auckland general manager, accounting division, MYOB, describes how the new office contrasts with their previous premises.

“Five years ago, when I walk into the MYOB office, I would see managers sitting in offices, staff sitting in cubicles, not really collaborating, working by themselves, operating in silos.”

Today, he says, “What you see is an open working environment where collaboration is encouraged.”

“Innovation is such a core thing for a technology company,” says Ferguson. “Creating the environment for that is fundamental.”

Send news tips and comments to divina_paredes@idg.co.nz

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