Case Study: New York City Office Space Optimization, an Operational Excellence in Government Success Story

In 2016, the Ash Center for Democratic Governance and Innovation at Harvard Kennedy School received funding from the Laura and John Arnold Foundation to launch the Operational Excellence in Government Project. The goal of the project is to identify and celebrate operational efficiency successes across state and local government via the project website. The site makes available for the first time from a single searchable portal 30 existing studies of government efficiency. This case study of right-sizing the New York City real estate portfolio is one of three that provides a detailed look at an outstanding example of success in achieving operational excellence in government. The purpose of the case studies is to explain the implementation steps, the key challenges, and the driving factors for success. With this work, we hope to reduce the cost of identifying opportunities for efficiency and cost savings across all layers of government, and to accelerate the transfer and deployment of these successful cases. The economic downturn of 2008 hit powerfully in the nation’s financial centers. Within a year, New York City government had suffered significant decreases in tax revenue. The Bloomberg administration, under the leadership of Deputy Mayor for Operations Stephen Goldsmith, sought ways to close the financial gap. Goldsmith turned to operational efficiency as a strategy for finding savings, and set out to study the ways the city could use shared services to improve quality while reducing cost for the administrative support functions of city government. The report, “Maximizing Efficiency in NYC Government: A Plan to Consolidate and Modernize Back‐Office Operations,” identified efficiencies in technology, human resources, revenue collections, the fleet of city vehicles, and the real estate portfolio. In total, the shared services efforts outlined in the report saved the city $100 million. This case study describes, for the first time, efforts by the deputy mayor for operations and his team to optimize the city’s real estate portfolio. New York City government employees occupy 300 million square feet of offices, schools, police and fire stations, warehouses, and the like. There had never before been an effort to view the entirety of the space as an asset that could be allocated more efficiently. Rather, over time, individual departments had independently acquired or leased the space they needed, predominantly with their own usage standards. By implementing the recommendations in the report, real estate was viewed as a city asset and was managed as a portfolio for the first time. In first three years of this effort, the city reduced office space by 400,000 square feet and saved $15 million in annual rent occupancy cost. Additional savings in energy costs totaled $4 million as the footprint shrank. While New York City is far larger than most other American cities, and while other cities may have lower real estate costs in general, there remain key insights from this project that could be valuable across state and local government, including: Put someone in charge. New York City had never before had a single person responsible for the real estate portfolio, and naming a chief asset management officer meant there was someone responsible for right-sizing the portfolio. Leadership was essential to the continued focus on measurement and consistent follow-up with departments to achieve results. Rely on data. To manage the portfolio, the first step was determining how much space was being paid for and how much was being used. This set a baseline that enabled tracking both goals and savings and established a common understanding of the metrics for measuring progress. Rethink how much office space is needed. The efficiency review found that city workers occupied almost twice as much square footage per employee as private-sector employees (290 square feet versus 176 square feet). A mandatory use of private-sector standards for open-plan office space for new office buildouts significantly shrank square footage, while bringing city employees in closer alignment to efficient and modern private-sector practices. Rethink storage. Walking around to look at the real estate identified inefficiencies — a closet full of never-used typewriters, conference rooms that could not be used because they had become storage space for water bottles, offices converted to paper file storage, and outdated computers and phones that filled an entire floor in an office building just to avoid the cumbersome process of sending them to surplus. Switching to offsite records storage, converting paper files to electronic ones, and switching to filtered instead of bottled water for new offices significantly reduced storage needs. Do not pay for vacant space. At the time of the project, New York City was paying occupancy costs for desks that were vacant, a full 13.6 percent of all desks. Reducing the vacancies saved $13 million. The pages that follow describe the work of a small, highly talented team of city employees who used a rigorous data collection process, best practice benchmarking, and fresh perspective from the private sector to significantly decrease operational costs to the city by right-sizing the real estate portfolio.