Leasing vs Ownership: Reconsidering the Balance in Commonwealth Property Strategy
For decades, leasing has been the default setting for Commonwealth office accommodation. Around 94 per cent of the Commonwealth's non-Defence office portfolio is currently leased rather than owned (ANAO, 2018) - a figure that reflects a deliberate policy focus on flexibility, capital efficiency and value for money.
But recent Parliamentary Standing Committee on Public Works inquiries have reopened a bigger question: is leasing always the right call, especially for the functions of government that aren't going anywhere?
For agencies weighing their own property strategy, the debate is a useful reminder that accommodation decisions deserve the same long-term planning rigour as any other major capital commitment.
Why Leasing Has Been the Default
The economic logic behind leasing is sound, and it's why so many public sector property strategies still lean on it heavily. Leasing means capital isn't tied up in real estate and can instead flow toward service delivery, infrastructure or debt reduction. It also builds in flexibility to respond to:
Organisational change and machinery-of-government shifts
Workforce fluctuations
Technological transformation
Evolving workplace requirements
Leasing also shifts a range of risks: obsolescence, maintenance liabilities, market fluctuations onto the property owner rather than the tenant. For many government functions, particularly those with uncertain or shorter-term footprints, this remains an entirely rational strategy, and one well suited to a considered leasing approach that keeps options open without locking in unnecessary long-term exposure.
The Case for Ownership: Sovereign Assets, Not Just Accommodation
The counterargument has been gaining traction, and it starts from a simple observation: governments plan differently to private organisations. Companies relocate, merge or wind up. Core government functions, such as taxation administration, border protection, law enforcement, and national security, persist indefinitely.
When a function is genuinely enduring, accommodation stops being a short-term operational input and starts looking like long-term strategic infrastructure. Ownership, from this view, contributes to:
Public balance-sheet strength
Capital preservation and protection against rental escalation
Strategic control over important sites
Financial resilience and intergenerational wealth creation
This isn't a new idea. Parliament House, courts, defence establishments and major research facilities were historically built with exactly this thinking. The live question is whether that philosophy deserves a bigger role in property decisions today, and it's a conversation that benefits from clear governance and assurance frameworks to keep decision-making transparent and defensible.
The Break-Even Question
One of the more overlooked issues in the debate is the relationship between cumulative lease costs and underlying asset value. Commercial leases occupied by Commonwealth entities commonly run for ten to fifteen years, often with extension options. Take a simplified example: a $300 million building at a 6 per cent net effective yield implies annual rent of around $18 million. Over time, that adds up:
10 years of occupancy = $180 million in rent
20 years of occupancy = $360 million in rent
30 years of occupancy = $540 million in rent
That example excludes financing, maintenance and asset value changes, but it points to a real question: at what point does leasing stop being a flexibility decision and start functioning as a more expensive form of ownership, without any of the equity to show for it? Getting a clear answer requires disciplined budgeting and funding analysis that looks well beyond the current budget cycle.
What Australia Can Learn from Canada and the UK
Australia, Canada and the UK are all stable Westminster democracies, yet they've taken noticeably different approaches to public property.
Australia has generally favoured lower public debt, smaller direct ownership of commercial assets and heavier reliance on leasing and private capital.
Canada, by contrast, has maintained a larger federal property estate and places greater weight on long-term asset stewardship, even while carrying higher gross debt, Canadian policymakers routinely point to strong net debt figures once government-owned assets are counted (Department of Finance Canada, 2025).
The UK, through its Government Property Agency, has gone further still, actively managing acquisitions, disposals and redevelopment as part of a deliberate strategy to build a "smaller, better and greener" estate.
Put simply: Australia tends to ask "how do we minimise accommodation costs?" Canada and the UK are more likely to ask "how do we maximise the long-term value of what we own?" Neither approach is inherently superior, but the contrast is a useful prompt for any organisation reviewing its own accommodation philosophy.
Sustainability Adds a New Layer to the Debate
Leasing can look attractive from a sustainability standpoint. It allows organisations to move into newer, more energy-efficient buildings as needs change. But that view only accounts for operational energy use. Once embodied carbon is factored in, the emissions locked up in construction, fit-outs, refurbishment and demolition — the picture gets more complicated.
Commercial fit-outs are commonly replaced every ten to fifteen years, and lease expiries often trigger fresh cycles of strip-out and rebuild. Increasingly, industry thinking suggests that adaptive reuse and long-term stewardship of existing buildings can produce lower lifecycle emissions than repeated relocation and reconstruction.
Sometimes the most sustainable building isn't the newest one; it's the one that already exists. This is where thoughtful capital works planning becomes essential, ensuring refurbishment and lifecycle investment decisions are made with full visibility of long-term environmental and financial outcomes.
Public Borrowing vs Private Capital
The ownership-versus-leasing debate increasingly intersects with a second question: how should major property investment be financed?
Institutional investors and infrastructure funds are actively seeking long-duration assets backed by secure government cash flows, so access to private capital isn't the real constraint. The bigger issue is cost: government generally borrows more cheaply than private financiers, because sovereign debt is considered low risk.
That raises a fair question: if government intends to occupy an asset for fifty years and carries most of the strategic risk anyway, why pay a private financing premium?
Advocates for private financing point to genuine benefits: construction discipline, maintenance accountability and stronger performance incentives. But critics note that private financing structures can sometimes be attractive for budgeting reasons; deferring capital expenditure and spreading costs over future decades, rather than because they deliver better value.
Both sides of that argument matter, and working through them properly requires the kind of structured budgeting and funding modelling that tests assumptions rather than defaults to convention.
There's No Single Right Answer — But There Is a Right Process
This isn't an argument that ownership beats leasing, or vice versa. Property decisions depend on operational requirements, market conditions, financing structures, workforce needs, asset lifespan and risk allocation, and the right answer will differ from one asset, and one organisation, to the next.
What the Commonwealth debate does make clear is that accommodation strategy deserves to be treated as a genuine long-term capital decision, not just an annual line item. That means asking which assets should be leased, which should be owned, how they should be financed, and how each of those choices supports long-term financial sustainability and organisational capability.
How ASPA Can Help
At ASPA, we help organisations navigate exactly this kind of complexity — bringing together strategic planning, leasing advice, capital works management, governance and assurance, and budgeting and funding expertise to support smarter, longer-term property decisions.
Whether you're weighing up a lease renewal, planning a major capital works program, or building the financial case for a long-term accommodation strategy, our team can help you cut through the trade-offs and make decisions that stand up over time.
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Contact us today to start the conversation.