Shrinking State and Local Government Office Space

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COMMENTARY | With states and local officials searching for ways to cut budgets, many are looking to reduce how much real estate they occupy.

Before the end of the year, the Nebraska Department of Administrative Services will move from the three floors it occupies in a Lincoln-based office building to one floor. That will reduce the 30,000 square feet of office space for its 300 employees to 17,000 square feet. “Currently, about 80% of our team members have an assigned desk or office and 20% have more flexibility,” says Jason Jackson, the department’s director. “We’ll flip that percentage so that 20% of team members will have a dedicated desk and assigned seats.”

Companies like Facebook previously resistant to remote work have completely shifted gears during the pandemic, now suggesting that significant numbers of employees could do so in perpetuity. At the state and local government level, the notion of cutting back on office real estate space is also springing up across the country—a clear reaction to both the downturn in the economy and the general success of telework during the pandemic.

In Nebraska, Jackson describes the contraction of his department’s real estate footprint as a win-win—saving budget dollars and providing employees with the flexible work-life balance they covet. The move is regarded by both his department and the governor’s office as a pilot for the state as a whole.

The effort to run city and state real estate more efficiently can be seen in decisions to cancel plans for new building initiatives, while using existing space as efficiently as possible.

Take the recently abandoned $3 million project to expand office space in a 12-year-old courthouse building in Pine County, Minnesota. The expansion was designed to accommodate about 60 human services workers, who were to be relocated from the 100-year-old former courthouse building. This human services office will still be moved to the new courthouse, but with only 20 staffers expected to be present every day.

What’s to be done with the rest of the workers? Given an encouraging Covid-19 telework experience, and changes in state requirements for in-person meetings, officials now envision 40 human services staffers working remotely and sharing space in the central office when needed.  “In the past these 60 people would have all been in an office setting,” says Mark LeBrun, the public works director.

Many other cities, counties and states are looking into space consolidation and potential reduction, but are currently in study mode, debating the pluses and minuses of change. In Kansas City, Missouri, for example, the city council passed a resolution on August 20th to require the city auditor to immediately dive into a performance audit of real estate use and the potential for long-term savings.

The issue is considered so critical that the audit is being prioritized over all other city audits and is due by December 2. It will look at space utilization, the cost and occupancy of city-owned and leased offices, the ability to better utilize vacant real estate owned by the city and an evaluation of space needs if Kansas City permanently adopts a new telecommuting policy. As we wrote in Route Fifty in June, the city has had a very positive work-at-home experience during the pandemic.

There are complexities in these efforts to save real estate dollars. As long as the coronavirus pandemic continues, the prospect of shrinking square footage and putting more employees in shared space raises concerns about requisite social distancing.

Remodeling offices also requires money that may be hard to come by in the current tight budget environment. Altering real estate is easier for individual agencies and smaller governments, while multiple other complicating issues will likely affect the speed of change in larger cities, counties and states.

Then, too, there’s a  need to meet and confer with the employee unions that would be affected, the difficulty of getting out of long-term leases, and concerns about giving up the unexpected innovation that sometimes occurs between co-workers in an office environment. Janel Forde, director of the Department of Central Management Services in Illinois, is intrigued by the potential introduced by the telework experiences of the last few months, saying that policies about “how work gets done” have been “turned on their head.” But she’s also quick to point out the interactions that are lost when you give up a communal work environment—“the unstructured informal office touch points and opportunities you can’t quite replicate in virtual worlds.”

As the issue of office environment and office space is studied and debated, many other governments are looking to the example of Tennessee, which launched Alternative Workplace Solutions (AWS), a new approach to the state’s office environment, in 2016. The initiative relied on the willingness of volunteer departments to adjust to a world in which a high percentage of employees would only work out of their central home offices part of the time, otherwise working from home or in the field.

For participating departments, workspace was redesigned to eschew individual offices or desks in favor of flexible shared regular and standing desks, meeting spaces and comfortable seating areas for team discussions. Christi Branscom, commissioner of the Department of General Services, estimates that the state has saved about $5 million a year in real estate costs and reduced square footage by 375,000 square feet. In the near future, the Department of General Services projects it will shrink office space by another 359,000 square feet with more previously reluctant departments ready to join AWS following their experience with telework during the pandemic.

As to concerns about contagion in a shared space environment, Branscom is confident that some office adjustments—such as Plexiglas space separators, dramatically stepped up janitorial services and rigorous cleaning rules—will help continue to keep Tennessee offices safe.

For other governments that seek to follow Tennessee’s path, she emphasizes the importance of training and support for managers who are used to seeing people sitting at their desks. “The biggest challenge is understanding that this is a change in work culture and not just in real estate,” Branscom says.

Katherine Barrett and Richard Greene of Barrett and Greene, Inc. are columnists and senior advisers to Route Fifty.

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