Leasing

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.

The Australian Government Property Register includes a Property Marketplace that can assist entities to advertise vacant space, identify vacant Commonwealth leased or owned office space and advertise for space required. If you need access to the Property Marketplace, please contact Property Data.

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.

Where consistent with an NCE’s business needs and the 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 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.

If you have any questions about leasing arrangements or requirements, please contact Property Framework.

Lease Notification and Endorsement Processes

The leasing of office and shop front accommodation must:

be based on a value for money analysis (refer to the CPRs for further information). Use WoLC as a basis for financial calculations and comparisons. Be consistent with the Leasing Stratergy developed by the Strategic Property Adviser for Finance

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.

For more information, contact P roperty Framework.

Notification and Endorsement Thresholds

Lease Notification Process _{^{(GST Inclusive)}}

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).

Lease Endorsement Process _{^{(GST Inclusive)}}

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 Minister for Finance (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.

The endorsement of a lease proposal by the Minister for Finance (or nominee) does not constitute funding support for the proposal.

Entities that have not transitioned to the PSCP Arrangements should contact P roperty Framework for advice and support on leasing decisions.

WoLC Calculation

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:

the entity is relocating outside of its current area as defined by SA2 area, and
the workforce proposed to be moved represents 10 per cent or more of the local workforce in its current SA2 area.

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:

An analysis of the impacts on local businesses
An analysis of the impacts on the road network and infrastructure
Other employee and community impacts based on community consultation where required to qualitatively assess the full implications of a relocation.

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.

Emissions reductions

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.

Disposing of a Lease

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 (LAA Act) and Lands Acquisition Framework.

For more information, contact LAA.