November 2010
Australian Government Office
Occupancy Report 2009
ISBN (Online): 978-1-921600-59-3
Copyright Notice
With the exception of the Commonwealth Coat of Arms, this document is provided under a Creative Commons Attribution Licence 3.0 Australia (http://creativecommons.org/licenses/by/3.0/au/) .
This document must be attributed: “Commonwealth of Australia, Commonwealth Property Review Branch, Australian Government Property Office Occupancy Report 2009”.
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Acknowledgements
Photographs taken by Steve Keough, Steve Keough Photography
Contents
Contents 3
Executive summary 4
Introduction 5
Overview 6
The occupational density target 7
A snap shot of Australian Government property 9
Occupational density, September 2009 14
Appendix A: Agency specific data 21
Appendix B: Collection methodology 65
Acknowledgement 67
Executive summary
Policy context
The Commonwealth Property Management Framework (the Framework) was established in October 2009 to guide the efficient and effective management of Commonwealth property. One of the elements of the Framework is the occupational density target of 16square metres per occupied workpoint (16m2/OWP).
Agencies prescribed under the Financial Management and Accountability Act 1997 are expected to have regard to this target as they enter into new lease commitments or undertake major fit-outs.
Improvements to occupational density should occur gradually since agencies are not expected to break existing lease commitments or undertake otherwise unnecessary refurbishments. The target may be not achievable in some buildings due to operational constraints and the need to prioritise the delivery of policies, programs and services to the highest standards.
Under the Framework, agencies are required to supply data to the Department of Finance and Deregulation (Finance) for properties that have 500m2 or more of office space. The data are used to help agencies identify and progressively move to better property management practices and inform whole of government policy. The data will also be used to track progress against the occupational density target.
Baseline for improvement
The first data were collected by agencies in late September 2009 and supplied to Finance in late October 2009[a]. These data represent a point in time picture of the Australian Government’s office tenancies at the commencement of the Framework. It is therefore the baseline from which improvements in the future will be measured.
As at September 2009, 27 per cent of the government’s 613 office tenancies met the occupational density target of 16m2/OWP. This starting point reflects a government decision that the target be set at a level that would drive improvements. The median occupational density was 20.6 m2/OWP.
This report sets out key characteristics of office tenancies, including the size, regional distribution, mix of office and non-office areas and lease expiry profile as at September 2009. The lease expiry profile indicates that there will be an opportunity to improve densities in most office tenancies in the next ten years, although substantial improvements should be made in the next four to five years.
The report also includes an analysis of the relationship between occupational density and other factors such as size, location, heritage status and quality of tenancies. It is clear that there will need to be improvements to office fit-outs before improvements to occupational density can be realised.
Although property data is reported to Finance every six months, it will take two to three years before a reliable trend can be established to determine whether improvements are being made or whether further changes to government policy are needed.
Introduction
Commonwealth Property Management Framework
In October 2009, the Australian Government established the Commonwealth Property Management Framework to guide the efficient and effective management of Commonwealth property by agencies subject to the Financial Management and Accountability Act 1997.
The framework establishes the broad context within which the Australian Government manages its properties[b]. Key elements of the framework include the Commonwealth Property Management Guidelines, supporting guidance and the Australian Government Property Data Collection (PRODAC).
Each Australian Government agency is responsible for managing the properties it leases and owns. This devolved approach means that property decisions are made by those best placed to determine what is needed to deliver programs and services on behalf of the government.
Scope of this report
This report includes information on Australian Government properties within Australia that contain 500 m2 or more of office space. Data are not collected for certain military and intelligence properties (such as defence bases and training establishments) or overseas properties.
The data have been collected in accordance with specifications, which ensure that all data are collected on a consistent basis. Further detail on the data collection methodology and the meaning of key terms is at Appendix B.
This report is based on data from the first PRODAC data capture in September 2009. As such, the report provides a snap shot of Commonwealth property prior to the establishment of the property framework and is the baseline from which improvements to property management can be made over time.
The period between the collection of data in September 2009 and the release of this publication has been used to verify the data and consult agencies on the information provided at Appendix A.
Overview
Government property
Managing property within the government sector is fundamentally different to managing property in other sectors. Unlike many organisations which are generally focussed on a single objective, the government faces the complex task of using its resources to achieve a range of economic, social and environmental objectives. This creates particular challenges for property management within the government context.
Size
The Australian Government holds one of the largest property portfolios in the country. In September 2009, there were 613 Australian Government office tenancies in 137 locations in Australia. Collectively, there were 711 leases[c] for office tenancies and 11 owned office tenancies covering a total of 2.92million square metres[d]. Around 87 per cent of this area was office area, with the remainder used for operational or other non-office purposes.
Diversity
The Australian Government property portfolio is very diverse. While many office tenancies are exclusively used for traditional office work, others are used for face-to-face customer service centres, back office customer support, telephony and processing. Some tenancies are also used for activities other than office work. Examples of this include border protection facilities within airports, Australian Antarctic Division facilities, the Commonwealth Law Courts, the Royal Australian Mint and the National Science and Technology Centre.
Flexibility
The Australian Government property portfolio needs to be flexible. Government agencies need to be able to respond quickly to emerging issues, new responsibilities and government restructures. Although it is difficult for agencies to anticipate future demands and restructures, these changes have an immediate and significant impact on property management strategies and can delay the achievement of previously planned efficiencies.
Responsibility
Responsibility for managing property is decentralised under the framework established by the Financial Management and Accountability Act 1997. Under this framework, each agency is responsible for its leases, irrespective of whether the agency procured the leases or inherited the leases through a government restructure. This decentralised approach means that property decisions are based on each agency’s understanding of what property it needs to perform its core functions.
Priorities
Agencies are required to manage resources, including their property, in an efficient, effective and ethical manner. This needs to be done within the context of each agency’s first priority to deliver policies, programs and services of the highest standard. Placing a higher priority on delivering the core functions of government means that, at times, some tenancies will be utilised at less than optimal levels. However, each agency is expected to continuously improve its property use and management in order to achieve value for money.
The occupational density target
The target
The Commonwealth Property Management Guidelines establish an occupational density target of 16square metres per occupied workpoint (16 m2/OWP). This does not mean that each workpoint can occupy an area of 16m2. Rather, the area includes the space around all workpoints (including vacant workpoints) plus all ancillary spaces such as meeting rooms, conference rooms, training facilities, libraries, office storage areas, break-out areas and circulation spaces. Depending on the amount of ancillary space and vacant workpoints in a tenancy, the area around each workpoint will need to be less than 16 m2 for the target to be met.
Setting the target
The occupational density target was established before the first PRODAC data capture was undertaken. The target was set at 16 m2/OWP so that approximately one-third of office tenancies would meet the target and the remaining tenancies would need to improve in order to meet it. As such, the target has been set to drive improvements for the majority of tenancies.
Setting the target in this way recognised that many government agencies had already initiated property efficiency strategies which are achieving good results. The 167 tenancies (27 per cent of office tenancies) that met the occupational density target in September 2009 demonstrate that the target is achievable.
The remaining 446 office tenancies within the government’s portfolio represent opportunities for improvement. It would be inaccurate to say that these tenancies have ‘failed’ to meet the target as these tenancies were fitted out and occupied before the target was established.
Meeting the target
The occupational densities presented in this report establish the baseline from which improvements can be made over time. Improvements are expected to occur gradually over the next three to ten years. They cannot occur immediately for a number of reasons, including those outlined below.
Existing leases
Improving occupational density will create efficiencies by reducing the amount of office space the Australian Government leases or owns. This cannot be achieved until there is an opportunity to surrender existing space. For leased tenancies, which make up a significant majority of the government’s office tenancies, this generally cannot occur until leases expire.
Depending on the specific needs of an agency, it can take 24 months or more to plan, procure and relocate to a new tenancy. In many instances, contractual arrangements for new tenancies were already established to replace leases that were expired or near expiry in September2009. This restricts the ability to meet the target in some new leases.
The lease expiry profile, which is discussed later in this report, indicates that there will be an opportunity to move to better densities for the majority of office tenancies in the next ten years, although substantial improvements should be possible within the next four to five years.
Refitting
It is possible to improve occupational density in existing leases through a reconfiguration or replacement of the existing fit-out. However, the cost of replacing a fit-out, along with the cost of removals and disruption to work will, in many cases, exceed the savings that can be achieved by improving occupational density. In keeping with the requirement for the efficient, effective and ethical use of resources, any proposals to refit a tenancy should be supported by a cost-benefit analysis.
While it may not be cost effective to undertake refits for the sole purpose of meeting the density target, refits that have been planned for other reasons do present an opportunity to improve occupational density. The benefits of improving densities through a refit generally eventuate only if the agency is expanding or is able to surrender some space through other expired leases or new subleasing arrangements.
Subleasing
Subleasing arrangements can improve densities where there is an efficient fit-out in place and there is a marketable block of vacant area in the tenancy. The greatest capacity to sublease is in Canberra since this is where half of the government’s office space is located. However, as a dominant tenant in Canberra, the Australian Government is both a key source and user of subleases. Since the density target applies to all Australian Government agencies, supply for subleases may exceed demand in Canberra and other markets where the government is a major player.
Regional offices
Some agencies may need to relocate to new tenancies once their leases expire to meet the density target. Although property markets in metropolitan areas are likely to be sufficiently robust to supply office space that meets the needs of the government, this may not be the case in some nonmetropolitan areas. There may be particular difficulties in remote areas where the supply of office space is limited.
The extent to which improvements can be made in regional and remote areas will not be known until the density target has been in place for a few years and leases in these areas begin to expire. While agencies are expected to seek opportunities to meet the target for all new or renewing leases, their ability to deliver quality public services in these areas should not be compromised.
Temporary vacancy
PRODAC data indicate the state of the Australian Government’s office tenancies at a particular point in time. In a property portfolio as large as that of the Australian Government, at any given time, there will always be some tenancies that are fully or partially vacant as agencies transition between leases, undertake refurbishments or prepare for agency growth or downsizing. Some level of vacancy needs to be maintained so that agencies can respond flexibly to changes in government policy or programs.
In September 2009, 24 tenancies were fully vacant and an estimated 20 tenancies were substantially vacant. The Australian Government includes these buildings in its data collection and its calculation of occupational density as a matter of completeness and transparency, even though these vacancies are temporary.
Cyclical workloads
Some government agencies are affected by cyclical peaks and troughs in workload. For example, the Australian Electoral Commission is affected by three year election cycles, the Australian Tax Office by annual tax cycles and the Australian Bureau of Statistics by the five yearly Population Census cycle. This affects staff numbers and therefore affects the point in time occupancy captured by PRODAC.