Ageing offices not being refurbished
One of Australia's largest unlisted property funds with premium office blocks in Barton and the city is alarmed at an unwillingness in Canberra to refurbish ageing office stock.
Portfolio manager of the $7.9 billion funds manager ISPT Super Property Peter James says the inactivity is unlike any other market in Australia and throws up a red flag to institutional investors.
Commonwealth agencies insist on new buildings for their staff and along with private sector tenants, won't sign up leases long enough to justify refurbishing old buildings.
Mr James was surprised only 8 per cent of buildings in the latest development statistics were for refurbishment projects.
''Eight per cent out of the total coming stock onto this market, I think that is an alarming result, and one the industry and government probably want to take a very good look at,'' he said. ''It's not what I see in other states and throws a red flag up to institutional owners.''
Mr James said many agents were after short-term leases of three to five years, but they were unsustainable as they did not offer any incentives for people to invest in property.
He said refurbishment had to involve more than replacing carpets and light fittings.
He gave an example of 2 Constitution Avenue, where ISPT would spend $40 million ''re-birthing'' the building with replacement of services, a new facade, lobby, rooftop garden, creche, cafe and meeting rooms and bringing its national energy rating system up to 4.5 stars.
As well as having Australia's high vacancy rate, Canberra's reliance on the Commonwealth - for years its trump card - is now weighing on the market because of the trail of empty buildings in the wake of new, energy efficient accommodation.
Large amounts of office space have been withdrawn from the market, but at an industry gathering yesterday senior Canberra property figure Noel McCann wanted to know when 700,000 square metres of old office stock would fall out of the market.
To fix the problem, the ACT Property Council wants industry ''ambassadors'' to join the ACT government in a regular dialogue with the Commonwealth.
Commercial agent Andrew Balzanelli said the sector needed to tackle head on looming redundancies within Commonwealth agencies.
''If we were in any other state and someone was talking about making … 12,000 people redundant every premier would be telling the government to stick their head in,'' Mr Balzanelli said.
''We basically have got to do the same.''
Overseas investment and a buoyant residential sector snapping up old office blocks for apartments have cushioned previous downturns in the office market sector. But an apartment building spree and weaker sentiment have slowed the ACT's residential sector, while overseas funds have retreated, according to Mr Balzanelli, because of inconsistent tax policies in Australia.
Valuer Steve Flannery said institutions should be re-investing in their Canberra assets, rather than being ''belted'' by the ACT government's lease variation charge, which added costs to redevelopments.
Agent Paul Powderly said the property sector's ambassadors also had to work with the ACT government to bring more corporate headquarters into the territory so the sector became less reliant on Commonwealth tenants.