Government agencies reduce office footprint as workers stay at home

Victoria’s Transport Department has scaled back its office footprint by one-third in the past two years as other government agencies reduce their presence in Melbourne’s CBD in response to flexible work arrangements.

In its annual report tabled in parliament, the department said it had cut back tenancies at 121 Exhibition Street and 567 Collins Street and reduced overall office space from 186,000 square metres to 121,000 in the two years to June 30.

The total number of offices held by the department increased, as did the number of full-time equivalent staff, after it merged with VicRoads and Public Transport Victoria.

The department could not immediately say why its office footprint was reduced, but in their annual reports, the Department of Premier and Cabinet and the Victorian Auditor-General’s Office both reported consolidating tenancies because of flexible working conditions after COVID-19 lockdowns.

The Victorian Auditor-General’s Office (VAGO) said severing its office space last year helped the watchdog to record a surplus.

“Our hybrid working model has led to a reduction in the demand for our office premises, and on December 1, 2021, we exited our lease agreement for level 32, 35 Collins Street, Melbourne,” VAGO said in its annual report.

The Auditor-General’s Office, which retains a lease at level 31 of the same building, said decreasing office space saved $400,000 and a further $900,000 on operating costs, savings that were redirected to auditing.

The Department of Premier and Cabinet also said its offices had a “more efficient footprint” now that staff were commuting to the city less frequently.

Over the past 12 months, the department has “further consolidated our real estate portfolio in the Melbourne central business district” with most employees now working at 35 Collins Street.

A spokesman said the government “manages properties to maximise the efficient use of space”.

The public sector is the CBD’s biggest employer. Workers are generally expected to go to the office three days a week but have the option to negotiate, with similar arrangements in place at most private companies.

Mask mandates for public transport and taxis were lifted last week, leaving almost none of the COVID-19 restrictions that have deterred workers from returning to their offices in the past.

Some departments, including the Department of Health and the Suburban Rail Loop Authority, are looking to upsize, according to a commercial agent who did not want to be identified.

The Department of Environment, Land, Water and Planning (DELWP) has increased its office footprint in the past two years, with more than 55,000 square metres tenanted across Victoria, up from about 51,000.

Deputy Liberal leader David Southwick said the CBD’s recovery had stalled and accused Premier Daniel Andrews of “flying the white flag”.

“Instead of adding to already record ‘for lease’ signs across the CBD, we need innovative solutions to return workers, visitors and vibrancy to our city centre,” Southwick said.

Weekend foot traffic has recovered to about pre-pandemic levels in the CBD, while last Wednesday was the busiest workday for commuters in the month of September, and Lord Mayor Sally Cap said productivity was surging.

Cath Evans, Victorian executive director of the Property Council, said activity in the CBD was starting to bounce back and demand for office space had remained steady.

“Considering that the majority of commercial leases are longer term, organisations in both the public and private sectors typically take a longer view when reviewing their space requirements,” Evans said. “Flexible working arrangements don’t necessarily translate to a reduction in floor space, as economic growth must be factored into long-term space requirements.”

To encourage Victorians to dine out, attend events or visit galleries, the Andrews government has reintroduced its dining and entertainment stimulus package. Under the program, 25 per cent of a bill worth more than $40 can be claimed back as a refund.

“We have invested $300 million jointly with the City of Melbourne to boost the CBD through the Melbourne City Recovery Fund and the Melbourne City Revitalisation Fund,” the government spokesman said.

With Simon Johanson

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