Work began preparing 56 The Terrace to become the Ministry of Social Development headquarters in late 2014.

Taxpayers are forking out close to $40 million to move Ministry of Social Development (MSD) staff to their new digs.

However, that bill may rise as they struggle to squeeze 2200 national office staff into it.

As a result, the ministry has leased more office space down the road to cater for the overflow for two years.

From mid-August, 1900 staff will move into their new office at 56 The Terrace - of which the ministry holds an 18-year lease - while the other 300 will be based nearby at 89 The Terrace.

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MSD chief executive Brendan Boyle refused to say how much the second lease was worth, citing commercial sensitivity, but said the extra costs fell within the budget for the national office move.

"The project is forecasted to come under the $39 million budget and no additional money has been required…

"No extra funding has been needed to get the additional space."

However, he admitted $1.7m was being spent on a "minor fit out" of six floors of the second building, which included IT infrastructure.

The ministry's relocation to 56 The Terrace was approved in late 2013.

Since then new work streams, functions and a "huge change programme" had seen national office numbers increase, he said.

"[So] national office staff numbers could rise further depending on our work programmes."

Boyle reiterated the second lease was a "short-term measure over two years", and eventually all national office staff would be based in 56 The Terrace, he said.

The ministry were forced to move from their Bowen campus because the building owners wanted to renovate, he said.

"MSD has to move. The current offices are being gutted and refurbished by the owners later this year as they are at the end of their commercial life.

"We first moved onto Bowen Campus in 1973 and have staff working out of three buildings. With our lease expiring we had to move."

The move was also part of the Wellington Accommodation Project, which is aimed at reducing the amount of space leased by government agencies in Wellington and saving taxpayers a projected $333m over 20 years.