The scrapped London Quarter project, set to house three federal government tenants on a prime city block, could have been worth more than $1.5 billion in Commonwealth leases over 25 years.
The Canberra Times on Friday revealed Walker Corporation had pulled the plug on plans for the 11-storey building on the corner of London Circuit and Northbourne Avenue, after the National Capital Authority requested the project be revised by "height, size and scale".
An industry source confirmed the planned lease for the three departments, including the initial 15 years, plus two five-year options to extend, was valued at more than $1.5 billion.
The Department of Employment and Workplace Relations, alongside the Department of Education and the Australian Electoral Commission, planned to move to the 70,000-square-metre office in mid-2026.
But Walker informed the government agencies late Thursday the development would not proceed, citing "ongoing delays" in obtaining a works approval for the site from the planning authority.
It leaves the federal government agencies back at square one, after a lengthy procurement process aimed at consolidating 11 leases across Canberra.
Government officials told a parliamentary committee the consolidation would save $9 million per year on leasing costs, and that existing properties were aged.
Existing leases had been due to expire between October 2022 and May 2025, but the agencies said they had options for short-term extensions.
A spokesperson for the workplace relations agency on Friday said the government was "working closely with involved agencies and the developer to finalise arrangements".
"We will then work to determine next steps, including longer-term accommodation options."
The block had been earmarked for the office development, with the City Renewal Authority last year issuing "several conditional land sale contracts to prospective developers for the Commonwealth's office requirements".
The ACT government is now waiting on a decision from the federal government to determine the future of the block, a spokesperson said on Friday.
The agencies received six other proposals in their initial approach to market, but will have to recommence the procurement process.
It could push the move to a new office back to 2029, said Stephen Oxford, a government leasing expert at Australian Strategic Property Advisers.
"They have to reset the whole time frame," Mr Oxford said.
"A new development is going to take four to five years and, therefore, if they were to run a new procurement process, and assuming that would take 12 months, they're probably looking at 2028-29 option to be available."
Mr Oxford said a five-year extension at the existing employment headquarters at 50 Marcus Clarke Street would be a sensible step for the government.
"There are options available to them, though, that are high-quality buildings that are existing in the market," he said.
"I don't think it's a disaster in terms of accommodation."
We've made it a whole lot easier for you to have your say. Our new comment platform requires only one log-in to access articles and to join the discussion on The Canberra Times website. Find out how to register so you can enjoy civil, friendly and engaging discussions. See our moderation policy here.
