Minimising Surplus Office Space
Wherever possible, non-corporate Commonwealth entities (NCEs) must seek to minimise surplus office space through leasing decisions, including:
- assigning a lease to another NCE
- entering a Memorandum of Understanding (MoU) with another NCE to occupy all or part of the space
- disposing of a lease and the Commonwealth’s interest to a third-party external to the Commonwealth.
NCEs should work with their Property Service Provider (PSPs) to identify suitable options.
In recognising different property requirements that NCEs may have, NCEs acting as landlords, tenants or sub-tenants, are expected to work collaboratively to reach a mutually beneficial agreement on leasing and sub-leasing arrangements.
This may include after-hours access and shared use of common areas.
In such instances, the tenant NCE must charge the intended subtenant a rent consistent with prevailing market conditions at the time the sub-lease arrangement is being established. This includes having regard to the likely rent and lease incentives the sub-tenant NCE could pursue through other leasing opportunities. In determining the rent, the NCE tenants may include any additional services, such as security, as a result of different operating requirements of the sub-tenant.
Sub-leasing arrangements between NCEs should be established and used as administrative arrangements internal to the Commonwealth, with minimal input from external consultants, and should be reflected in a formal MoU. The accountable authority for the sub-tenant NCE must take into account the benefits to public resources generally from taking a whole of government approach, in accordance with section 15(2) of the Public Governance, Performance and Accountability Act 2013.
Lease Notification and Endorsement Processes
The leasing of office and shop front accommodation must:
Leases for office accommodation outside Australia are exempt from the Lease Notification and Lease Endorsement processes.
Entities should engage with Finance as early as possible with respect to leasing proposals, particularly where an entity is seeking to deviate from the Leasing Strategy. Where an entity is seeking to deviate from the Leasing Strategy, it should work with its PSP to request a deviation.
Notification and Endorsement Thresholds
For office and shop front accommodation leases with a WoLC between $2 million and up to $30 million (or up to $100 million for NCE’s in the Defence portfolio).
For office and shop front accommodation leases with a WoLC of $30 million and above (or $100 million for NCE’s in the Defence portfolio).
The Minister for Finance (or nominee) may impose conditions on a commercial lease procurement (including the exercise of an option under an existing lease) following lease endorsement/notification and assessment.
These conditions may include:
- that a new lease procurement may not proceed due to the availability of suitable surplus space or due to inconsistency with the Leasing Strategy; or
- that particular requirements will apply to the procurement process where significant local impacts arise (see Local Impact Assessment for more information).
The endorsement of a lease proposal by the Minister for Finance (or nominee) does not constitute funding support for the proposal.
Details of completed WoLC calculations must be submitted along with the Notification/Endorsement documentation.
Entities should refer to the Financial Analysis Model (available through their PSP, the WoAG Strategic Leasing GovTEAMS community) or email Property Framework, for assistance with how to calculate WoLC for leasing purposes.
Local Impact Assessments
Local Impact Assessments (LIA) must be undertaken where Finance considers a potential move could adversely affect a local economy, transport and logistics infrastructure or give rise to adverse social and community effects.
Finance will determine if a full LIA is required, in consultation with the entity, through conducting a threshold test, which considers whether:
- the entity is relocating outside of its current area, as defined by the Australian Bureau of Statistics Statistical Area level 2 (SA2) area;
- the workforce proposed to be moved represents 10 per cent or more of the local workforce in its current SA2 locality.
The following information highlights the LIA Process:
A Request for Information or Expression of Interest may be undertaken prior to this consideration to identify options.
There should be no approach to market to procure accommodation until the threshold test is undertaken and advice is provided by Finance.
1. Finance to conduct a threshold test if:
|Where both criteria for the threshold test are true, a full LIA is required
2. Finance to conduct a full LIA (using the Local Impact Assessment Methodology) – including:
|3. Finance to provide LIA to the relevant entity for comment
|4. Finance refers to the Minister for Finance for consideration
Commonwealth National Lease
The Commonwealth National Lease (CNL) Suite contains templates and guidance designed to assist Commonwealth entities with lease negotiations. It has been developed on the basis that using standard form documents can reduce the time and costs associated with negotiations and improve the commercial office market’s understanding of the Commonwealth’s position in leasing transactions, and in doing so, achieve desired Commonwealth outcomes.
It is expected that NCEs will use the CNL Suite for office accommodation, although it is not mandatory.
In addition to these requirements and processes, the Net Zero in Government Operations Strategy includes minimum requirements for building energy and other ratings for the leasing of office space of certain sizes, and other specific actions to reduce emissions from buildings.