- The Impacts of Congestion Levy on your Office Location
- Levying on the Edge
- No such thing as a free lunch or free parking it seems!
THE IMPACTS OF CONGESTION LEVY ON YOUR OFFICE LOCATION
Finding the right office location is crucial to businesses. What does the congestion levy mean for businesses looking to have their office located in the CBD?
The congestion levy is a cost to CBD based businesses being implemented throughout major global cities in an attempt to cut down the number of cars in the city predominantly to reduce traffic congestion but with the obvious environmental concerns also relevant.
In Victoria, the Victorian government imposes an annual levy on “off-street” parking spaces used for parking cars or larger motor vehicles within the Melbourne and city fringe area.
From 2015 there are two levy Zones: Zone 1 rates for 2016 is $1,360 for each parking space and Zone 2 is $960.
“But I live in this area, why should I pay to park?”
You won’t have to pay. Residents will be exempt from the levy for a car parking space used exclusively to park their car while they are at home.
But if you lease your parking space to a daily commuter, who commutes to the CBD or for other non-residential parking purposes, you will be subject to the levy.
LEVYING ON THE EDGE
As the saying goes, if you’re not living on the edge you’re taking up too much space.
So too, you may be levying on the edge!
The purpose of the congestion levy is to dissuade people from utilising cars in the city and inner fringe areas, making parking ever more unaffordable.
This is a significant cost for businesses especially those that traditionally had large car parks for staff and even visitors. This cost is now causing a major re-evaluation of office location and how staff and visitors will be travelling in.
When taking into account the increase in work from home options, how many staff do you actually need to have working from the main office?
Here’s something to think about – Should you have a main CBD office with minimal parking for certain purposes and a satellite office outside the levy zone for the activities which don’t need to be in the CBD?
This levy is really changing the mindset of many commercial relocations. The introduction of an outer ring Zone 2 affects you if you are on the fringe.
ZONE 1 – RED
The category 1 levy area is bounded by the red lines on the map, being bounded by Hoddle St, Punt Rd, Queens Rd, Kings Way, the West Gate Freeway, City Link, Footscray Rd, Dudley St, Peel St, Queensberry St, Rathdowne St, Carlton St, Nicholson St, Gertrude St and Langridge St.
ZONE 2 – BLUE
The Category 2 levy area includes a number of inner city suburbs surrounding the existing Category 1 levy area as seen here. It takes in all or parts of the following areas:
| North | South | East | West |
| Carlton, Fitzroy, Collingwood, Parkville, Carlton North, Fitzroy North, Princess Hill, North Melbourne and residential West Melbourne | South Melbourne, Port Melbourne, Albert Park and St Kilda | Abbotsford | Commercial West Melbourne and Kensington |
NO SUCH THING AS A FREE LUNCH OR FREE PARKING IT SEEMS!
What appears a simple new levy, which yes, is substantial when you have numerous company car spaces, the ramifications are more far-reaching and definitely worth serious consideration in relation to your next office location.
As an example, let’s say you are a business operating in St Kilda Rd and are considering upgrading to a city location for convenience to resources, to better reflect your company’s brand and image or to access a key building.
You allow for a team of 50 staff including sales people and executives.
Your sales people need access to parking as they are in and out of the office servicing clients while most of your key executives and other staff live in Melbourne suburbs and prefer to drive into work each day.
For this exercise, let’s assume you are planning to pay for 10 car spaces.
In your St Kilda Road premises that would mean a congestive levy of $9600 pa, while in your proposed CBD office location, that would be $13,600, so already you have an additional $4,000 cost to consider with the other costs of moving.
Previous to 2015, you would never have had to pay the congestion levy, so the $13,600 is an immediate additional cost.
Let’s say you agree to 5-year commercial lease term – that’s $68,000!
If you lease in Zone 2 $960 per car per year for 10 cars over 5 years and you have the pleasure of contributing $48,000 to the public coffers.
But wait there’s more!
That’s just the government levy, you should also add the cost of leasing the car space.
Working on an average car space lease of $450 per month per space for 10 cars, that’s a grand total of $54,000 + $13,600 = $ 67,600 per year for parking. See how quickly a simple sneeze is becoming a cold.
Of course, if you provide staff with company owned and maintained vehicles, you well know what this is costing you as well.
CBD OFFICE LOCATION CONSIDERATIONS
Such significant costs are causing companies to consider whether they really need an office location in CBD Zone 1 to successfully carry out their business or is a move to Zone 2 and beyond a viable alternative.
A move from Zone 1 to St Kilda Rd or Zone 2 and you’re looking at $960 per car space, a year on the levy and cheaper car space leasing for starters and possibly cheaper commercial leasing also.
Another option is to look outside of the city and the levy zones all together but then comes the issue of access to public transport for staff and easy access for visitors. A move out of the levy zones might mean avoiding the levy cost but you may have to incur the cost of leasing more car spaces so your staff can drive to work. Now you need to consider 20 car spaces, not 10.
Then a third consideration, what about the cost to your business when staff quit because they live somewhere just too inconvenient to reach your new address in the suburbs?
The congestion levy is a significant business expense. Will we see an exodus of businesses from Melbourne CBD?
When reflecting on this and the many other considerations involved in your next office location, make sure you have a conversation with Agero – we have the experience and the expertise to deliver precise, considered and successful business accommodation outcomes for all Australian businesses.
Before you decide on your office location, talk to Agero today for expert advice on office fitout and relocation.
