Department of Finance staff are set to be moved into one of the swishest new buildings in Canberra despite talk of austerity because the bureaucracy is being offered a fitout worth tens of millions by the developer as an incentive amid a massive oversupply of commercial office space in Canberra.
The department also wants to consolidate its office space to save money.
The Public Works Committee is conducting an inquiry into the department's proposed fit-out of the 20,502 square metre building at 1 Canberra Avenue, meaning it would leave behind other premises and avoid a $220 million upgrade of the John Gorton Building.
The costs of works being offered by developer Willemsen Investment Corporation was between $20 million and $32 million.
Finance told the committee the new accommodation would allow it to release all of its current Commonwealth leases, and a majority of its privately owned leases.
It will be able to consolidate the majority of staff into a single tenancy, although some specialist staff will continue to be located off site.
The committee was told by Finance that there are clear operational advantages in consolidating the majority of its staff and functions into one modern and flexible building.
"Facade works at the John Gorton Building, expected to continue progressively around the building through to 2018, have had a range of staff impacts such as noise, reduction of natural light, staff entrance closures and car parking impacts together with essential repairs required to deal with safety issues such as exposure to asbestos and repairing tiles at risk of falling off the building," Finance's submission said.
The Department's property portfolio in the ACT consists of 22,429 square metres of office space at a number of locations including:
- the Commonwealth-owned John Gorton Building (11,598sqm on month-to-month occupancy),
- the Commonwealth-owned Treasury Building (6,396sqm lease expiring in September 2016),
- the privately-owned Tourism House (2,371sqm expiring September 2016),
- the Burns Centre (2,200sqm expiring February 2017),
- the Dairy Road Facility comprising of Building 5,6 and 7 (2,226sqm)
- and the Hume Data Centre (4,385sqm).
Subject to parliamentary approval, the fit-out of 1 Canberra Avenue was scheduled to be finished in July 2015.
The estimated fitout cost excludes GST.
Five-levels of office space at 1 Canberra Avenue covers 24,000 square metres.
A surplus of vacant office space in the ACT has now been dragging on for several years and the latest austerity measures placed on the federal public service will reduce the Canberra-based Commonwealth bureaucracy by an estimated 6500 by 2018.
Finance's submission to the committee about 1 Canberra Avenue said: "The ACT commercial office property market is currently very favourable to a large scale 'buyer', offering static or falling net effective rents with significant lease incentives."
Real estate agents have been approaching the building's owner, the 40-year-old locally-owned family business Willemsen Group, with potential tenants since at least August.
* Correction: The original online version of this story incorrectly said Finance would be paying the refurbishment cost.