"Net Zero Real Estate" or the 11th Commandment: "Thou Shall Not Grow"

In a memo release on May 11, 2012, the President reinforced the policies laid out by Executive Order 13589 (November 9, 2011) and the June 10, 2010 Real Estate related Memorandum on disposing of unneeded Federal real estate, targeting $3B in cost savings by the end of FY2012. In essence, this latest directive provides insight into the expected outcomes of budget planning. It focuses on four areas for cost savings, including:

1. Travel: spend 30% less than the FY2010 levels from FY2013 to FY2016.
2. Conferences: conference expenses should be appropriate, necessary, and managed in a manner that minimizes expense to taxpayers.
3. Real Estate: aggressively dispose of excess properties and make more efficient use of existing assets.
4. Fleet: maintain a consistent acquisition and replacement schedule to save costs.

For our purposes, we will focus on real estate. The brief section in the memo reiterates the language from the June 2010 memo that led Agencies to establish a Cost Savings and Innovation Plan (often referred to as the CSIP, pronounced "SEE-sip"). In addition, the memo required that Agencies:

"shall not increase the size of their civilian real estate inventory, subject to exceptions as described below.  Acquisition of new Federal building space ... that increases an agency's total square footage of civilian property must be offset through consolidation, co-location, or disposal of space from the inventory of that agency."

An important clarification to this requirement stated that Agencies can, in fact, construct that baseline inventory including the excess or disposed space from the June 2010 exercise. Expect a follow-up from OMB to help Agencies better understand the specific requirements for planning and implementation.

You can find the actual memo here:

Space as a Corporate Resource: Decoupling Individual Ownership Perceptions.

Why is telecommuting so hard? What is it about the office environment that creates the expectations for ownership of space? While the company may pay for a cubicle or a corner office, the individual employee is typically the "owner" of that space and is reluctant to part with or even share that resource. As a consultant, I often talk with clients about workplace strategies that typically involve the evolution of space from a 1:1 desk to employee ratio to a use model that is more open, collaborative and flexible. Cultural issues create complexity in implementation when individuals reject the idea of losing their space... treating their office or cube like a scared object for which they will protest for and defend against the "space invaders" (pardon the pun). Why? Simply put, these persons are unable or unwilling to evolve their perception of space and the role that it plays in their ability to perform work. About five years ago, I read a book that to this day influences my thinking on the separation of source from use. Blown to Bits is an observation on the economic impact of information being separated from the traditional physical distribution model (i.e. a book, stone tablets, billboards). It struck me that treating information as a corporate resource and separating it from the delivery source, is not unlike the separation of a particular space from an individual and treating space as a corporate resource that is managed for the best use at a given point in time for a particular goal achievement.

What does this mean? It means that by disaggregating space and creating a flexible set of use types we can help employees perform their jobs and increase productivity. This allows employees to use each space for its intended purpose and capacity, thus increasing effective utilization. Without assigned space, the employee evolves perception from one of space ownership to integration of space and performance.

What if GSA took a page from OGC's playbook?

Recently the UK's version of GSA put a moratorium on leases. That made me wonder, "what would happen in GSA did something similar?". I went to GSA's website and downloaded publicly-available data on leases. GSA's current lease vs. owned portfolio is tilted towards leases at ~55% of the total portfolio. Let's assume for a moment that GSA were to put a moratorium on renewing expiring leases, and instead directed requesting agencies to implement alternative workplace strategies and relocate to Federally owned space as appropriate. This scenario does not consider employee future growth which can range from 5-15% per agency and further drive the need for space. By simply not renewing expiring leases, GSA can cut more than $2 billion in rents by 2014! Check out the data analysis below and explore this scenario for yourself.

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