Property savings could provide government entities with desperately sought-after funds, Australian Strategic Property Advisers say. Photo: mesh cube.
Commonwealth agencies could unlock millions in savings through strategic property procurement, experts say.
Australian Strategic Property Advisers (ASPA) says current market conditions and modern workforce trends offer major savings opportunities – but agencies need to invest in property planning, adopt intelligent procurement design and move past outdated requirements briefs.
ASPA managing director Stephen Oxford says the savings potential is obvious, yet often missed.
“The commercial office space market is full of potential with conditions favouring tenants, so there’s no better time to explore savings opportunities,” he says.
With the Department of Finance calling for savings and many entities already under funding pressure, Stephen says now is the time for chief financial officers and property teams to improve property portfolio efficiency to help meet the challenge.
“Commonwealth leases are usually 10 to 15 years, so you need to make the most of the opportunity well before the expiry date to truly gain efficiencies,” he says.
“In other words, entities should take the time to thoroughly work through their requirements and plan their procurement processes to ensure they maximise the opportunity to improve their property portfolio outcomes.”
ASPA advises entities to plan in sufficient detail to support long-term financial strategy.
Stephen says projected savings opportunities associated with a new lease should be locked in years before the current lease expires.
“An entity’s chief financial officer should be provided with procurement plans that evidence a reduced footprint and the projected savings in lease costs from the commencement of the new lease,” he says.
Opportunities are not just limited to new leases.
“You might think because you’re midway through a long-term lease there are no opportunities for saving. That’s never true,” Stephen says.
“Whether it’s subleasing – a practice endorsed by the Department of Finance – surrendering footprint, renegotiating terms, or spotting hidden opportunities in the fine print, most leases contain untapped value.”
ASPA managing director Stephen Oxford and Tony Brine are experts at finding material savings for agencies in the Commonwealth’s property portfolio. Photo: Michelle Kroll.
A good strategy starts with understanding what’s changed and planning for today’s workplace realities – not outdated assumptions.
ASPA has observed that modern workplaces in other jurisdictions are regularly achieving fitout densities of 10 to 12 sqm per workstation and allocating 70 to 85 per cent of staff a desk.
The Commonwealth’s performance standards for office leases, administered by the Department of Finance, are a density of 14 sqm and 100 per cent desk allocation.
Stephen says these standards are dated and based on pre-COVID thinking from more than a decade ago.
“Outdated performance measures disguise the true opportunities facing many government entities – specifically in relation to the opportunity to consolidate and compress,” he says.
“Whilst we see some entities use the new lease procurement to consolidate tenancies, they rarely maximise this opportunity.”
Recent submissions to the Public Works Committee show some agencies have started to reduce their office space with desk-sharing rates at about 80 per cent. But remote work and low office attendance suggest there’s still much more room to downsize.
“In recent walkthroughs of three different government tenancies, we have observed attendance levels well below capacity and, in some instances, entire floors being empty,” Stephen says.
ASPA’s Tony Brine, who has advised on many of the Commonwealth’s largest lease transactions, says the Commonwealth should be investing in getting property procurements right because the savings more than justify the cost.
“We see transactions valued at several hundred million dollars, yet there is a hesitation from entities to spend money on engaging experts to advise on the procurement or sometimes to undertake the procurement at all,” Tony says.
“A lot of the time we see entities take the view that undertaking a procurement process, delivering a fitout, managing a relocation – it’s just too much work to do on top of their already busy roles. For most entities, it is often easier to exercise an option and push the issue back another five years.”
Tony, who’s spent much of his career providing financial, auditing and assurance services to public sector entities, understands the challenge from their perspective.
“When we look at what entities must satisfy from a compliance perspective and to demonstrate best practice, no wonder they are often overwhelmed by the challenge.”
Stephen says it’s a myth to think engaging property strategists is cost-prohibitive.
“Planning might cost tens of thousands – but it often saves tens of millions, even for small agencies. That’s not an exaggeration,” he says.
“In this environment, every lease transition can and should deliver savings.”
When looking to cut costs, some agencies skip property advisers and lease directly through property service providers or commercial agents. Stephen says this is well intended but a less effective way to secure savings.
“We work for the Commonwealth. Our job is to get the best outcome for the agency – not the landlord,” he says.
“If you’re going to spend millions on a procurement, the last thing you want to do is to rush into anything. You want robust analysis, a deliberate strategy and a carefully considered approach.”
For more information visit ASPA.
