Minimising Surplus Office Space

  1. Wherever possible, non-corporate Commonwealth entities (NCEs) must seek to minimise surplus office space through leasing decisions, including through assigning a lease to another NCE, entering into a Memorandum of Understanding (MoU) arrangement with another NCE to occupy all or part of the space, or divesting a lease to a third party external to the Commonwealth. NCEs should work with their Property Service Providers (PSPs) to identify suitable options.
  2. 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.
  3. Where consistent with an NCE’s business needs and the Whole of Government Leasing Strategy (Leasing Strategy), NCEs must occupy existing Commonwealth leased or owned office space as a priority over sourcing new accommodation in the market. In such instances, the tenant NCE must charge the intended sub‑tenant a rent consistent with prevailing market conditions at the time the sub-lease arrangement is being established, including with regard to the likely rent and lease incentives of other leasing opportunities the sub-tenant NCE could pursue. 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.
  4. 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.
  5. An optional MoU template is available to NCEs for download from the Resources page.
  6. The Australian Government Property Register (AGPR) includes a property marketplace that can assist entities to identify vacant Commonwealth leased or owned office space, in addition to working with their PSPs.
  7. Please contact Finance if you require access to the AGPR Property Marketplace.

Lease Endorsement

  1. The leasing of office and shop front accommodation must be based on a value for money analysis, using Whole-of-Life Costs (WoLC) and must be consistent with the Leasing Strategy developed by the Strategic Property Adviser (SPA) for Finance.
  2. 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.
  3. For office and shop front accommodation leases with a WoLC between $2 million and $30 million (or up to $100 million for the Department of Defence), the Lease Notification process must be followed.
  4. For office and shop front accommodation leases with a WoLC over $30 million (or over $100 million for the Department of Defence), the Lease Endorsement process must be followed.
  5. Entities should refer to the WoLC Calculator template available through their PSP for assistance with how to calculate WoLC for leasing purposes. For the purpose of the Lease Endorsement process, WoLC includes fit-out. Completed templates should be submitted along with the Cost Benefit Analysis.
  6. The Finance Minister (or nominee) may also ‘call-in’ any other leasing proposal for endorsement, even if it would otherwise be below the value thresholds. This includes where special considerations such as local impacts apply.
  7. The endorsement of a lease proposal by the Finance Minister (or nominee) does not constitute funding support for the proposal.
  8. Local Impact Assessments must be undertaken where Finance considers a potential move would adversely affect a local economy, transport and logistics infrastructure or give rise to adverse social and community effects.
  9. Finance will determine if a Local Impact Assessment is required, in consultation with the entity.
  10. If a Local Impact Assessment is required, Finance will coordinate the assessment using the Local Impact Assessment Methodology. A Local Impact Assessment must be referred to the Finance Minister when the NCE:
    1. is considering relocating outside of its current area as defined by the Australian Bureau of Statistics SA2 area calculations; and
    2. the workforce proposed to be moved represents more than 10 per cent of the employment in its current locality.
  11. The Finance Minister (or nominee) may impose conditions on a commercial lease procurement (including the exercise of an option under an existing lease) following lease 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.
  12. Entities that have not transitioned to the Property Services Coordinated Procurement Arrangements should contact Finance in the first instance for advice and support on leasing decisions.
  13. Leases for office accommodation outside Australia are exempt from the Lease Notification and Lease Endorsement process.

Commonwealth National Lease

  1. 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.
  2. It is expected that NCEs will use the CNL Suite for office accommodation, although it is not mandatory.
  3. Publicly available elements of the CNL Suite are available from the Resources page.  
  4. For further information, please contact Finance.

Divesting a Lease

  1. When surrendering or assigning a lease or sub-leasing to a third party external to the Commonwealth, officials must have regard to their responsibilities under Section 119 of the Lands Acquisition Act 1989.
  2. For further information, please contact Finance.

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