City of Newcastle says it is poised to rent out surplus office space in its new home in Newcastle West to a government department.
The council said in 2019 that it would sub-let the spare space on the second floor of the Stewart Avenue building for about $500,000 to help offset the $2.835 million annual rent it was paying for the next 15 years.
But the 1050-square metre space in the building's north tower, first used as a temporary kitchen, has been vacant for more than a year, prompting questions from some councillors about whether the lack of rental income was compromising the business case that underpinned the council's office move.
A council spokesperson said on Friday that a government department would start leasing 700 square metres of the floor space in May.
The other 350 square metres had gone out to market this week and had "already attracted strong interest".
"The quality of the building has ensured its ability to be leased on favourable terms to ratepayers, an exceptional achievement given the impact of COVID-19 on demand for office accommodation," the council spokesperson said.
"Based on the lease terms agreed to, we expect to generate more than the $500,000 per annum forecast in the business case shared with councillors."
Exceeding $500,000 would price the surplus office rent at about $500 a square metre, almost double the $276.92 per square metre the council is paying over 15 years in other parts of the building.
Cr Kath Elliott, one of the critics of the move costs, said she was unaware that the council had found a tenant.
The council plans to spend a net $35 million in rent over the next 15 years after taking into account the sub-lease.
It sold the former City Administration Centre "roundhouse" for $16.5 million before moving out then spent $17.6 million fitting out the new offices, digital library, council chamber and emergency operations centre in the Stewart Avenue building.
It also sold the Clarendon Hotel, Fred Ash building and another adjoining building to help fund upgrades to Newcastle Ocean Baths.
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