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Govt lease moratorium

THE commercial property sector is the latest to feel the sting of sweeping Government reforms, with the Premier’s office this week imposing a six-month moratorium on all departments taking or renewing leases.

As the Gallop Government forges ahead with its attempt to reduce the number of depart-ments from 46 to 23, it has decided to put all lease nego-tiations on hold until December this year, or until the moratorium is lifted.

It is expected, where necessary, departments will enter into monthly holding agreements until a permanent tenancy agreement can be approved by the Treasury, which is now in the process of establishing a Government Accommodation Committee to review all tenancies.

A government spokesperson said the moratorium was introduced because the effect the restructuring would have on the Government’s office space needs would not be known for some time.

Property sources believe the freeze on leasing activity is likely to create uncertainty in the commercial leasing market, particularly in the CBD where State Government departments occupy significant portion of the lettable office space.

There are more than 20 State departments with a city address and 1996 Ministry of Planning commercial land use statistics indicated State and Federal government departments accounted for 35 per cent of the total lettable space.

CBD landlords and commercial property agents are now wondering whether they will retain their star tenants at the end of the year.

“In the short term it will introduce a degree of uncertainty to the market … and this could have a negative impact, but it is yet to be seen to what extent,” Colliers Jardine research manager David Cresp said.

Jones Lang LaSalle leasing director David Evans said the moratorium was likely to create a short-term reduction in leasing activity, however, in the medium to long term, it could result in additional activity as the Government sought to concentrate and consolidate its departments.

A Government spokesperson said that, in imposing the moratorium, the Premier’s office had recognised the potential for problems and had formulated an “escape clause”.

“This will be used if there is an urgent requirement for a lease to be signed and in this case the request will be forwarded to the Treasury to be considered on a case by case basis,” the spokesperson said.

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