Govt office space squeeze to save $338m

HANK SCHOUTEN
Last updated 05:00 23/11/2012

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The Government wants to cut the amount of Wellington office space it uses by 30 per cent and save more than $16 million a year on its annual rent bill.

State Services Minister Jonathan Coleman boasted of the cuts yesterday after a Cabinet decision on plans to lease more than 60,000 square metres of new office space for five big government departments - health, education, welfare, business and Crown Law.

The departments all need new head offices and the Government is using a central property agency to negotiate cheaper leases, save money by getting departments to share services, and cut the amount of space per worker.

The process is being driven by the recently formed Property Management Centre of Expertise.

The agency invited proposals from Wellington building owners and developers earlier this year to provide office space in the capital, Porirua and the Hutt Valley.

This generated a lot of interest among those eager to fill vacant properties and finance upgrades of old office blocks.

Agency chief David White has Cabinet authority to negotiate leases for all the departments involved, with proposals up for ministerial approval early next year.

In previous years, department chief executives did their own deals separately. Dr Coleman said this drove costs up because they were effectively bidding against each other.

That was disputed yesterday by Wellington Property Council president Ian Cassels, who said departments had all been pretty effective in securing good deals and were not paying above market rents.

Dr Coleman said the new property strategy "is likely to reduce the office space footprint in Wellington by the equivalent of three Reserve Bank buildings".

"It will be a big step in mitigating the rapidly rising property costs the public service faces.

"A business case presented to Cabinet indicated a reduction of the office footprint in Wellington of 30 per cent will save $338m over 20 years, which is a 20 per cent reduction in cost."

Mr Cassels said he welcomed any Government moves to increase efficiency, but it was already a very competitive market, with office vacancy rates running at between 15 and 20 per cent.

From Wellington's perspective the key thing was to ensure departments had their offices in the city centre rather than periphery, he said. It was better for the city's economy to have people working and spending time in the city centre, and it was also better for the workers.

Wellington Mayor Celia Wade-Brown said the council knew there was a focus on downsizing the public sector, which was why it was focused on attracting more businesses to the city.

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Economic portfolio leader Jo Coughlan said the Government was a huge tenant for the CBD, and it was critical to retain that.

"Essentially it's a matter of the Government making a long-term commitment to Wellington."

Contact Hank Schouten
Property reporter
Email: hank.schouten@dompost.co.nz

- The Dominion Post

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