Federal Real Property Portfolio OptimizationLowering Costs and Improving PerformanceRoundtable Policy Discussion
“Opportunities for Taxpayer Savings: Federally Leased Office Space in the National Capitol Region”February 11, 2015
James M. ReidySenior Managing Director
Savills Studley
Federal Real Property Portfolio Optimization > 1
…the Dynamic Alignment of an organization’s work patterns with the work environment to enable peak performance and reduce costs.1
Portfolio Optimization Starts with…
Different work patterns and environments require a workplace strategy that allows for differentiated solutions based on a common approach.
Federal Real Property Portfolio Optimization > 2
Workplace Strategy…
…IS:A business case-driven acknowledgment of, and functional and financial response to, 21st century workforce needs and behaviors:
…IS NOT:• Adesignsolution,butwill result in one
• Ateleworkprogram,butmay incorporate telework capabilities and benefits as a competency
• Ablankethotelingprogram,butmay incorporate hoteling elements as appropriate to the organization and its workforce composition
Collaboration Mobility Cost/Budget Realities
Differentiated Roles
Traveler Teamer Independent Resident
Federal Real Property Portfolio Optimization > 3
Staff and Space Misaligned
Today’s workforce uses workspace in a way that is often at odds with traditionally planned and assigned workplaces.
Leases are legal obligations and rent still needs to be paid even when budgets are cut or revenue is reduced.
Funding shortfalls negatively impact training, equipment, and staff – affecting mission capabilities.
Collaboration is how work is completed today. Staff are no longer tied to desks by phone lines and LAN cables.
Field Work
Collaboration Teleworking from home
Teleworking on travel
Underutilized Office Space
CAUSEEFFECT
Federal Real Property Portfolio Optimization > 4
Workplace Strategy ‘Combined Arms’ Approach: Real Estate:• AssessingOccupancyAgreementcommitmentsandcomparing
costs to prevailing Market Rates
• Quantifyingcurrentutilizationrates
• IdentifyingSpecialPurposeSpacerequirementsperorganizational unit, location, region
• Identifyingopportunitiesintenant-favorablemarketsonbuildings
• UsingtheMarkettosolvemanyissues
Human Capital/Change Management:• Defineworkforcecomposition
• Executive/manager/staffsponsorship/participation
• Unionsupport
• Performancemanagement
• Focusonaccountability
• Engagementandcommitmenttomission
Mobile Technology Infrastructure:• Enable mobile work
• Securityconsiderationsandconnectivityissues
• Datatosupportinsightfulanalysis
Real Estate
Human Capital / Change
Management
Mobile Technology
Infrastructure
Federal Real Property Portfolio Optimization > 5
Business Case Assessment for Workplace Strategy
Today’s Workforce Is Mobile
35%–50% of Offices Are Under-Utilized5
The Annual Workstation Cost Is
$10K–$15K/FTE5
We spend more time in collaborative work spaces, in the field, on TDY, and teleworking and less time at individual workstations. The result is a measurable percentage of costly under- and even un-utilized workspace.
GSA states that “…the average utilization for workspace in the U.S. and in Europe between the hours of 8:00 AM and 5:00 PM is 35 to 50 percent…”
This same report also states that “…the cost of accommodating the average Federal associate typically runs $10,000–$15,000 annually per person.”
Benefits of a Workplace Assessment
• Identifiesopportunities:
– Reduce real property footprint and operating costs
– IncreaseutilizationandachieveUSFGoals
– Redirect funding from unnecessary rent to mission support
• Enables$5Mto$7.5Mcostreductionsper1,000FTEsat50%averagedaily utilization5
• AlignstheWorkplacewiththewayemployeesarealreadyworking:collaboratively and where they need to be
Federal Real Property Portfolio Optimization > 6
Real Estate Assessment
CaseStudy:Identifiedthe“RealmofthePossible:”reduceRealPropertyoperatingcostsbyover40%nationally for a Federal law enforcement agency
5 3
6
872
1
4
$10.000% 20% 40% 60% 80% 100%
$20.00
$30.00
$40.00
$50.00
$ /
SF
$60.00
$70.00
Note:• Allleases<50%utilization
• Largestlease+$20/SFovermarket
Note:• Retainedgeographicpresence
• Leaseeliminationanddownsizing=+40%reduction
• Savingscanbeappliedtodirectmissionsupport
Potential LA Metro Consolidation PlanTargetRate:$30–$40/SF
TargetUtilization:85%–95%
7
3985 6
1
4
2
Keep Lease – Add FTE Downsize Lease Eliminate Lease
Federal Real Property Portfolio Optimization > 7
Workforce Composition
Assessing the composition of worker types is key to defining the footprint and cost reduction opportunities within a given portfolio: National, Regional, Cityscape.
Traveler
Teamer
Independent
Resident
Spends the majority of time outside the office, (e.g., traveling, attending off-site meetings in customer locations)
Spends the majority of time in the office, primarily at a desk, where other employees need to access them face-to-face on a daily basis
Spends the majority of time collaborating formally and informally with co-workers
Spends the majority of time primarily at a desk, with limited face-to-face interactions with clients or co-workers
Workforce Distribution Law Enforcement AgencyEvery 1,000 Staff = 460 Workstations
RESIDENT1.00WSAllow.*=100WS/1,000
INDEPENDENT0.50WSAllow.*=50WS/1,000
TEAMER0.70WSAllow.*=210WS/1,000
TRAVELER0.20WSAllow.*=100WS/1,000
*WS Allow = Workstation Planning Allowance
OPPORTUNITIES:118KSFFootprintReduction/1,000FTE* (-53%)
$8.1MCostReduction/1,000FTE**(-54%)
Human Capital/Change Management Focus:• Assesstheworkforcecomposition,
• Emphasisonperformance-basedmanagement
• ReduceRisktoMission
Change Management Is Critical to Success
*Assumes220USF/Personaveragex540unneededworkstations **Assumes$15K/workstationx540unneededworkstations5
10%10%
30%50%
Federal Real Property Portfolio Optimization > 8
Myth Busting: Too Costly
Leveraging daily office occupancy can produce footprint and cost reductions and mitigate budget reductions by re-directing funds to mission support
Without moving a single wall or changing a stick of furniture.
Iftheaveragedailyoccupancyis60% then you can achieve:
Iftheaveragedailyoccupancyis50% then you can achieve:
Iftheaveragedailyoccupancyis30% then you can achieve:
Staff: Workstation Leverage Ratio
•Effectivelyachieve 145 USF/ staff*
•30%+ space and rent reduction
1.5:1 Staff: Workstation Leverage Ratio
•Effectivelyachieve 110 USF/ staff*
•40%+ space and rent reduction
2.0:1 Staff: Workstation Leverage Ratio
•Effectivelyachieve 73 USF/ staff*
•50%+ space and rent reduction
3.0:1*Assumesbaselineof220UsableSquareFootagePerPerson(USF/P)withinanAgency
Federal Real Property Portfolio Optimization > 9
Company Profile:Overview
• Foundedin1855
• 600locationsglobally
• 25officesintheU.S.withover600professionals
• Provideservicesto:
– Corporations
– Nonprofits
– Law Firms
– Government Agencies
– InstitutionsofHigherEducation
Single-Focused Firm Committed to Its Clients
• Over27,000professionalscommittedtoprovidinginnovativerealestate advisory services
Boston
DenverDenverTech Center
West LA
Orange County
San Diego
Downtown LA
Silicon Valley
San Francisco
Philadelphia
Dallas
Houston
Miami
Tampa
Chicago
Atlanta
CharlotteRaleigh
SuburbanDC Washington, DC
NJ NorthNew YorkNJ Central
San Antonio
Austin
Savills Studley Offices
Market Experience
Point of Contact
James Michael Reidy FRICSSenior Managing Director Savills Studley 1201 F Street, NW • Suite 500 • Washington, DC 20004 (202) 624-8510 [email protected]
Federal Real Property Portfolio Optimization > 10
References:1. Savage,AE(2005)WorkplaceStrategy:Whatitisandwhyyoushouldcare.
TheJournalofCorporateRealEstate.Volume7,No.3
2. Office of Management and Budget Policy Directive, M-12-12; http://www.whitehouse.gov/blog/2013/03/14/freezing-footprint
3. WhiteHouse/OMB/FederalRealPropertyCouncil-DrivingFederalPerformance:ManagePropertyEffectively;http://www.performance.gov/content/reduce-federal-footprint#overview
4. https://c.ymcdn.com/sites/fbiaa.site-ym.com/resource/resmgr/docs/voices_from_the_field_-_fbia.pdf
5. “WorkplaceUtilizationandAllocationBenchmarkReport,”July2011 http://www.gsa.gov/graphics/ogp/Workspace_Utilization_Banchmark_July_2012.pdf