The redevelopment of Penrhyn House in Woden is expected to lure Commonwealth public servants back into the struggling town centre.
Number 2-6 Bowes Street in Phillip has been treated to a $10 million upgrade by Melbourne-based Quintessential Equity in order to attract green leases in A-grade accommodation.
The boutique property fund manager purchased Penrhyn House for $14 million in June 2012 and embarked on a transformation to achieve a 5-star NABERS energy rating.
The company has recently invested strongly in Canberra's commercial property market and bought two Civic office buildings for a combined $41 million earlier this year.
Quintessential Equity director Shane Quinn said as government tenancies accounted for about 70 per cent of the office market in Canberra there was great incentive to regenerate older buildings in the capital.
He said he hoped the redevelopment of Penrhyn House would be the first step in attracting public servants back to Woden and he wanted the government to support the project and the town centre.
"There's a lot of employment being dragged out of Woden at the federal government level and what that will mean is it will affect the … small businesses that thrive off that employment because people are there to use their services," Mr Quinn said.
"If government don't support the Woden town centre, the regeneration of it is going to be very difficult because there isn't going to be the employment base and then you can't create the amenity for the surrounding people to want to come to Woden as a destination.
"I think regenerating this building is a step in the right direction for Woden and a lot of the assets out here, whether it be commercial offices or retail, a lot of it needs to be regenerated."
With 12,622 square metres of lettable area, Penrhyn House is enough for 900 public servants, according to the Commonwealth's standards of an average 14 square metres per bureaucrat.
It comes on the market during an exodus of Commonwealth employees from Woden.
The Environment Department pulled out almost 400 staff from nearby Lovett Tower earlier this year while the tower's main tenant, Veterans' Affairs, planned to move to Civic by 2016 and 35 National Disability Insurance Agency staff transitioned from Aviation House, in Woden, to Geelong.
The vacancy rate in Canberra increased in the past six months from 12.9 per cent to 13.6 per cent, according to the Property Council of Australia's recent office market report, and the surplus space problem appears as though it will last years.
Five levels of office space across 24,000 square metres, enough for another 1700 bureaucrats, has just been finished at 1 Canberra Avenue, Forrest, while the Defence Department was in the process of trying to consolidate another 24,000 square metres of vacant space across the ACT.
Mr Quinn said the Commonwealth had already signed a five-year commitment for 1000 square metres of space in the refurbished Woden building for a "my gov" shopfront.
Colliers ACT chief executive Paul Powderly said ACT government and Commonwealth tenancies would be targeted.
He said while the Commonwealth was contracting at the moment, it would eventually turn.
"It might not be for three months, six months, nine months, but there will be a need, there'll be a program announced by the federal government … and this building's sitting here available to satisfy their needs," he said.
"The idea is to be ready when it does turn."
He said however that the Woden office market was fragile and the town centre was currently faring the worst out of all the town centres in the ACT.