Office Leases – National – Costing

Government departments lease much of their office accommodation from private landlords, with national departments incurring around R3 billion a year in rental expenses. Owing to data limitations, the study had to use a sample of 1 000 leases that could be linked to floor size and costs. Its main finding is that about 60% of these leases were at above-market rents, with an average premium of 45%. The leases are also heavily concentrated: seven tenants hold more than 50% of leases (by value). Savings of between R20 million and R2.2 billion could be realised over the MTEF, depending on: Whether existing rents could be renegotiated to market levels (or even lower) Whether escalation caps could be set for the overall lease or for each element of lease costs Whether the changes could be effected before the expiry of existing leases or would have to be postponed until the leases have expired.