10.2 Management of the Commonwealth property portfolio

The Commonwealth’s property portfolio (the Commonwealth Estate) is diverse. It comprises:

  • the Defence estate of about 3 million hectares, with some 400 owned properties including 72 significant bases, 25,000 buildings and 6,000 other structure assets. The Defence estate has an estimated value of $20 billion;
  • the Finance estate of 106 properties including key accommodation (such as the Treasury Building and John Gorton Building); special purpose properties (including the Commonwealth Law Courts and the ASIO headquarters); vacant land; and properties with heritage and other unique features. This estate has an estimated value of around $1.4 billion; and
  • overseas property interests managed through the Department of Foreign Affairs and Trade and valued at about $1.5 billion.

In addition, Defence Housing Australia manages a total portfolio of 18,300 properties valued at around $10 billion. The CSIRO is also a significant holder of land and buildings. Its assets include some 1,000 buildings on 54 locations, with a land value of about $378 million and $1.1 billion for buildings.

The Commonwealth also leases office accommodation and specialist accommodation with over 600 leases in place for office space.

Management of the Commonwealth Estate presents challenges, reflecting the nature of the property, legislative obligations and legacy issues such as contamination and underinvestment in repairs and maintenance.

Since 1996, large-scale disposals and outsourcing of services peripheral to the government’s core responsibilities have led to the divestment of many of the commercially attractive Commonwealth properties. However, a significant number of properties remain in the Estate.

There is no complete whole-of-government public register of Defence and non-Defence Commonwealth-owned property, although a Register of Surplus Commonwealth Land Potentially Suitable for Housing and Community Outcomes is publicly available on the Finance website. The register contains details of surplus Commonwealth land considered potentially suitable for housing and community outcomes, but is not a full list of surplus Commonwealth land holdings.

The Commission considers a central register of the whole of Commonwealth property estate should be established.

The government’s core expertise does not and should not relate to the development, maintenance and leasing of office accommodation and other buildings that are commercially available. This is best left to the private sector.

A proposal to privatise Defence Housing Australia is outlined in Section 10.1.

The Commission considers further divestment of surplus Commonwealth property and land should be pursued with oversight from an independent private sector property expert. The process should entail identifying a list of suitable domestic properties including indicative divestment priorities and timelines; the risks associated with each property; and management strategies that may address the risks, in part or full. Representatives from the Commonwealth’s major property owners — the Department of Defence and the Department of Finance — should participate in this process.

The Commission recognises the current policy of returning all divestment proceeds to the Budget provides little incentive for agencies to pursue property divestment. Allowing agencies to retain a portion of sale proceeds has the potential to provide an incentive for them to assist in meeting broader divestment objectives.

The Commission also recognises property ownership, development and management requires considerable experience and skill that the Commonwealth often finds difficult to acquire and retain. Making greater use of contracted professional property managers is one way of achieving this.

Recommendation 58: Management of the Commonwealth Estate

The Commonwealth's property portfolio (the Commonwealth Estate) is diverse and of significant value. The Commission recommends that the management of the Commonwealth's property portfolio be strengthened, including by:

  1. establishing a central register of Commonwealth Estate properties within the Department of Finance;
  2. drawing on greater private sector experience in property management;
  3. undertaking a further divestment process to be overseen by an independent property expert; and
  4. continuing to use commercially available office and other accommodation as far as possible, ensuring there is competitive tension and value for money.