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Onwards and “Downwards”: The challenge of minimising office space in Commonwealth tenancies

In recent years we've seen an encouraging downward trend in the volume of vacant Commonwealth-leased office space. This indicates that the Commonwealth’s leasing footprint is being used relatively efficiently, however, there is an opportunity now to continue to capitalise on this positive trend by further considering: setting specific targets to work towards, forward planning leasing options, and how fit-out choices and fit-out guidelines may help.

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14 September 2022
Synergy Law
3 minutes
“Onwards”: The Commonwealth leased-office footprint 

There is a fine balancing act when it comes to minimising surplus leased Commonwealth office space – a core element of the Commonwealth Property Management Framework. On one hand, Commonwealth entities seek office space in which they can effectively deliver their outcomes and accommodate for any expected and unplanned growth (or fluctuations) in staffing levels. On the other hand, entities must also achieve value for money through their office leasing decisions and are expected to meet targets such as the occupational density target, being 14 m2 of usable office area per occupied work-point at the time of writing.  

In this sense, increasing footprint efficiency within the Commonwealth property portfolio is not a straightforward process. However, it is a goal that the Commonwealth must continually work to accomplish, especially within the context of an ever-changing socio-economic context (here’s looking at you, COVID-19).  

The recent 2021 Australian Government Office Occupancy Report (2021 Report) illustrates that we are heading in the right direction when it comes to minimising surplus office space while also balancing the need for effective public service delivery. This appears to be the case despite the increased prevalence of hybrid working arrangements within the Australian public sector, fuelled to a large extent by COVID-19 lockdowns.1 However, while the 2021 Report’s figures paint a positive picture and outlook, Commonwealth entities should continue to capitalise on the current momentum and maintain focus on office space minimalisation where possible. Entities must also ensure that fit-for-purpose properties are being occupied and underutilised spaces are removed from the property portfolio in accordance with the Commonwealth Property Disposal Policy, where appropriate.  

In recent years, there has certainly been substantial effort, and corresponding progress made, in minimising surplus office space in Commonwealth tenancies. The portion of tenancies meeting the occupational density target has increased, from 27.6 per cent in 2019 to 43.6 per cent in 2021.2 Recent figures also show a decrease in the work-point vacancy rate, from 15.2 per cent in 2019, to 8.8 per cent in 2020, down to 7.4 per cent in 2021.3 This vacancy rate compares the number of vacant workspaces to the total number of available workspaces. While there are other relevant metrics which contribute to a more comprehensive picture of the net benefits realised, a decrease in the vacant work-point rate tends to be linked with increased efficiency of office space usage.  

An increase in the number of tenancies meeting the occupational density target and a decrease in the vacancy rate are indeed good signs and an indication that recent changes to the Commonwealth property policy and operating environment appear to be working. Examples of such changes include the 2013 reduction of the occupational density target from 16 m2 of usable office area per occupied work-point to 14 m2, launching Operation Tetris in 2015, and implementing more formalised sublease management procedures under the Commonwealth Property Management Framework.  

“Downwards”: Capitalising on the trend 

The Commonwealth is now in a position to review what has been achieved so far, and to capitalise on the momentum by considering what other opportunities can continue the positive trends seen so far. We would suggest agencies consider the following: 

  • Specific targets: whether the current metrics used to analyse the efficiency of leased office space use are effective. Also, is it necessary to incorporate additional specific targets4 other than, for example, the occupational density target? While the decrease in metrics such as the work-point vacancy rate is highly encouraging, is there a clear goal that sets out expectations for Commonwealth entities which they can work towards?  

  • Forward planning: Is the current lease the best option and is it delivering value for money? The 2021 Report stated that 239 Commonwealth tenancies (38.7 per cent) have a lease that is either in holdover or expiring by 30 June 2023. Where possible, entities could consult with their Property Service Provider under the Property Services Coordinated Procurement Arrangements to explore lease options and planning, as expiring leases provide entities with an opportunity to revisit their accommodation footprint and realign their property portfolio within the context of their public service function and delivery outcomes.  

  • Fit-out choices and guidelines: Apart from appropriate leasing choices and property disposals, can fit-out choices also be used to minimise surplus office space, and are there appropriate guidelines in place for entities regarding fit-out decisions?  

Although substantial progress has been made in the past decade, efficient use of office space will continue to be on the Commonwealth agenda. Other ways of increasing efficiency within the Commonwealth property portfolio should be explored so that the Commonwealth continues to find the “right size” for its office-accommodation footprint.  

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