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News release


Victoria's Fire Services Levy

Implications for commercial property

MELBOURNE, 18 JULY 2013 – The Victorian Government’s introduction of its Fire Services Property Levy (FSPL) will significantly increase costs for many commercial property owners and tenants compared to the costs of the previous insurance-based fire services levy.

From the 1st of July 2013 a property-based levy was introduced to fund Victoria’s fire services replacing insurance-based fire service levies; the intention being to ensure that all property owners pay a fair contribution to funding Victoria’s fire services, not just those who take out adequate insurance.
Following this recent announcement, Jones Lang LaSalle conducted a benchmarking survey across a range of properties within its management portfolio. The firm has a market share of more than 50% of agent-managed investment-grade office buildings over 5,000 square metres in the Melbourne Central Business District, Docklands and Southbank precincts.
Head of Property and Asset Management, Victoria Bill Redfern said of the commercial properties surveyed, in almost all cases the FSPL will impose higher costs, and in the case of some properties the extra costs range between about $10,000 per year to well over $100,000 per year.  Across a portfolio of surveyed properties within the Melbourne CBD and St Kilda Road precincts the extra costs average an additional $1.77per square metre of net lettable area.
“To put this in context, in one case within our management portfolio, we have a property where the insurance-based fire services levy was approximately $25,000, but in 2012-13 the owner and tenants are now facing charges of more than $130,000 in the first year under the FSPL - an extra cost of more than $100,000 per annum or an increase of $2.50 per square metre.”
“Smaller, city fringe properties have also been hit hard. A small office building in Brighton previously paid about $143 under the insurance based levy and will now pay approximately $3,900 under the FSPL, being an extra $4 per square metre.”
Director, Sales and Investments, James Kaufman said the Fire Services Property Levy will have a major impact on either tenants’ occupancy costs or the assets’ capital value, depending on how building outgoings are treated under lease agreements.
“Tenants leasing on a net rental basis will see an increase in the charges for building outgoings. Whereas owners of properties leased out on a gross rental basis will be impacted by a reduction in net income due to higher outgoings. This in turn is likely to lead to a drop in the value of the asset” he said.