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"Not just a white elephant, a financial disaster": Govt's mounting 'dead rent' bill

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The State Government is likely to throw away around $4 million in “dead rent” for unused city office space by the end of next year, because of the former government’s decision to build a $40 million office block in a safe Labor seat, InDaily can reveal.

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Treasurer Rob Lucas last month claimed to have solved the riddle of how to fill the government-built tower on the corner of Nile and Robe St in Port Adelaide, with around 260 Treasury staff ordered to relocate from their present digs in Westpac House, the former State Bank building on King William St.

However, Lucas today conceded taxpayers would still be liable to pay rent on the vacated city space until its lease runs out in December next year – unless the Department of Planning, Transport and Infrastructure can find an alternative solution for it in the meantime.

InDaily reported in August that the transition of public servants – mostly from shared services – to the Port had left almost three floors of the city’s tallest building vacant since June, at taxpayers’ expense. However, Lucas said today the next “tranche” of the exodus – due to take place between December this year and February next year – was set to leave “a best estimate of seven or eight floors” of Westpac House vacant until the following Christmas.

Office space at Westpac House is currently advertised commercially at $525 per square metre, with industry insiders estimating each floor to be between 960 and 1000 square metres.

While the Government won’t reveal details of its own leasing arrangements, that means taxpayers will be paying in the vicinity of $4 million next year for unused office space in the heart of the city.

Lucas, who this week announced he’d save around $2 to $3 million a year by winding down the Motor Accident Commission, blamed the former Labor Government for the debacle.

“It’s not only a white elephant – it’s a financial disaster for the taxpayers of SA,” he said.

“Clearly it’s not in the interests of the taxpayers to end up in a position – by dint of the former Government’s decision to build an office in the Labor heartland of Port Adelaide – where taxpayers have to choose between paying dead rent in the city for a short period of time or dead rent in Port Adelaide for a long period of time.”

He said the Government had considered various options for relocating city workers, with staff in the Riverside building also in the frame – but the lease for that property runs until 2020, while “this particular [Westpac House] lease concludes in December next year”.

“It’s the shortest of the ones we’ve got available,” Lucas said.

“We will have some dead rent there for a period of time, unless we can find people from other areas where leases are coming through earlier than that, who can be transferred over.

“It wasn’t a very nice choice the former Government left us with… there’s no easy option.”

He said there were not enough shared services workers in Westpac House to fill the vacant floors in Port Adelaide, so “a few other odds and sods from Treasury” would make up the shortfall.

He said it was “possible” DPTI would be able to “find people from other agencies to move” into the vacant space.

“They’re actually looking to see if there are other government people in private sector leases… that might be able to move into Westpac, but it’s possible there’ll be significant dead rent at Westpac,” he said.

“It’s part of the mess we were left with.”

Acting Labor leader Susan Close, whose Port Adelaide electorate houses the new office space, denied Labor was to blame, saying “I think it’s been mishandled by the new government”.

She insisted there was “a clear deadline for when the public servants would be moving” that had fallen through since the March election.

However, when asked about the extended Westpac House lease, she said she was not the minister responsible and “unfortunately I didn’t have line of sight as to how that was going to happen”.

“It had been in the planning for some time,” she said.

Close said she had lobbied for the office block to be built to accommodate public servants as part of a plan to rejuvenate the port.

“Absolutely, to have 500 more workers in the Port will make it much easier for businesses to maintain a sustainable trade, so they’re not as dependent on visitors on the weekend,” she said.

“It’s much harder for business to grow when they’re just waiting for visitors in the weekend and when the weather’s good… I lobbied to have workers move down to the Port, absolutely – as the local member, I advocated for it to happen.”

Planning Minister Stephan Knoll had previously declared the six-floor Port building, for which the government has signed a long-term lease, would be tenanted by private sector Defence companies who were “knocking on its door” to get in, but none evidently knocked loudly enough.

The ground floor is leased by Renewal SA, whose then-CEO John Hanlon told InDaily in August the agency had “never refused to go in there [but] all we did was say ‘I don’t have the numbers to fill it’”.

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