NEW YORK CITY-Having committed to reducing its office footprint by 1.2 million square feet over the next four years, the city can take a passel of lessons from corporate tenants, CresaPartners’ Bob Stella tells GlobeSt.com. “Corporations today are being more economically efficient when they’re taking on the space,” says Stella, EVP and principal at the tenant-rep firm.
By its own admission, the city has not exactly practiced optimal efficiency throughout the 19 million square feet its 75,000 office-using employees occupy citywide. “In 2009, the Mayor’s Office conducted an office space utilization survey of 50 agencies and found that there were over 8,000 vacant workstations scattered throughout the city’s office space,” according to a report the Bloomberg administration released Monday. “This represents approximately 11% of all desks and amounts to at least $13 million in annual costs.”
Further, much of the city’s office portfolio was put together “many years ago under generous private office standards from the early 1990s,” with an average rentable-square-feet-per-employee ratio of 290, the report says. New guidelines released in 2008 set the baseline at 176 square feet per office worker.
“When times are good, money’s easy and budgets are pretty strong, it doesn’t get the same attention as it would today,” Stella says. “With city and state governments trying to balance their budgets, there’s a little bit of a lag effect. Corporations are a bit more nimble and there’s not as much politics attached to it.” Yet while government entities don’t have to make shareholders happy, Stella points out they’re facing many of the same pressures as corporate tenants.
As government agencies grow, they tend to develop their own, self-contained operating hierarchies. “Sometimes they need to step back and say, ‘hey, we’re duplicating a lot of the same functions,’” says Stella. Just as corporations are looking to centralize many functions, so too could the city, he adds.
“I read recently that there are something like 85 different groups within the city government using data centers or IT facilities,” Stella says. “Why don’t we look at having three or four larger ones where everybody’s sharing the same facility?” That would be the approach taken by a large national corporation divided into regions, for example.
Another lesson to be taken from the private sector, says Stella, is the move toward “an alternative workplace model,” in which open floor plans are replacing forests of private offices. “The footprint for that is for considerably smaller, and the cost of building it out is less, too,” he says. “Plus, if you want to shift people around, it offers you a lot more flexibility.”
Taking another cue from corporate tenants, Stella advocates that the city take a back-office approach to locating certain functions and offices. “The operations that don’t have a lot of public contact can be moved to Brooklyn or Queens, where rents are still cheaper,” he says. “They don’t have to be located in Midtown.”
The Bloomberg administration’s report recommends looking at some four million square feet of leases that are due to roll over the next four years, with the possibility of not renewing some of them. Further, Stella suggests that the city look to sell off its surplus office property “or find alternative uses for it.” With 6.5 million square feet of city-owned office space, it’s another potential area of savings.
The city’s report advises the creation of a citywide “strategic space planning unit” that would monitor and benchmark space utilization and produce an annual office space report with recommendations to improve efficiency. It also suggests hiring an outside real estate advisor “to identify additional savings opportunities.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
