Presentation Transcript

1. Strategic Analysis: Study of Administrative Office Space Utilization Presented to: Wake County Board of Education April 20, 2010
2. Administrative Facilities Studies and Strategic Analysis Previous analyses of administrative facilities utilization were performed as part of ongoing long range planning Factors prompting recent re-examination of strategic analysis: Current Lease for administrative space at Crossroads II expires April 30, 2011 Significant recent changes in economy and real estate market conditions Recognition of function redundancies and inefficiencies of multiple locations Opportunities for consolidation to efficiently downsize space Age and condition of owned facilities
3. Professional Services Consultant Retained November 3, 2009: Board approved selection of Grubb & Ellis/Thomas Linderman Graham, Inc., to provide professional services related to the leasing of administrative space. Staff directed Grubb & Ellis to provide a Strategic Analysis of administrative space utilization and needs to assist the Board in acquiring the most suitable and appropriate solution. Staff tasked Grubb & Ellis with evaluating and comparing multiple possible scenarios for addressing current and future administrative office needs. The resulting Strategic Analysis was presented to the Facilities Committee on March 16, 2010.
4. Project Scope Can WCPSS improve operating efficiency through better space utilization? Can WCPSS achieve better service to the public through program adjacencies? Can WCPSS create flexible space to accommodate changes over time (expansions or contractions)? Can WCPSS reduce overall occupancy costs by capitalizing on current market conditions?
5. Cost/Benefit Analysis Analyzed costs of currently occupied space to establish financial baseline for comparison Analysis included: Current lease costs Operating Expenses for leased and owned facilities Maintenance and Repair expenses for owned facilities Projected Capital Improvements for owned facilities
6. Current Administrative Office Space 5 Locations Across Wake County: Noble Road 21,261 SF Built in 1957 3600 Wake Forest Rd. 99,603 SF Built in 1968 Millbrook MRC 10,286 SF Built in 1972 4600 New Bern Ave. 8,507 SF Built in 1988 Crossroads II 74,201 SF Built in 1993 Total occupied space: 213,858 SF 35% Leased, 65% Owned
7. Current Administrative Office Locations Depicts current WCPSS owned locations Geographic Center of Wake County Depicts current WCPSS leased locations Population Center of Wake County
8. Administrative Office Space Consolidation Scenarios Analyzed over 20 year period I. Status Quo II. New Construction III. Facility Purchase IV. Lease Consolidation
9. Scenario Comparisons: Status Quo Multiple facilities operation continues inefficiencies in duplication of physical spaces and personnel positions, and necessary employee travel between facilities Continued ownership of functionally obsolete buildings that are declining in value Very costly to renovate and retrofit aging buildings and systems Difficult to accommodate for future personnel growth No move required Most costly scenario
10. Scenario Comparisons: New Construction Build-to-Suit allows for customization and maximum use potential & efficient consolidation into a central location Construction prices are attractive now, but prices are expected to be higher at build start. Would build a larger facility to accommodate future growth Design & land acquisition timing dictates a build start two years in the future; intermediate lease solution is necessary. Limited available land sites suitable for this type of facility Board would have ownership of a valuable asset
11. Scenario Comparisons: Facility Purchase Adaptive reuse allows for customization & efficient consolidation into a central location Construction prices are attractive now, but prices are expected to be higher at renovation build start. Would purchase a larger facility to accommodate future growth Would require extensive re-design and renovation to gain efficiencies Dependent on finding a suitable, existing office space facility; property supply (and willing sellers) are very limited Board would have ownership of a valuable asset
12. Scenario Comparisons: Lease Consolidation Leasing allows for efficient consolidation into a central location Very competitive Landlords in the current market downturn: Options exist due to a variety of currently available locations Significant concessions are commonplace (rent abatement, turn-key tenant improvements & cash moving allowances) Ability to lock into long-term favorable lease rates Offers flexibility for future growth and contraction WCPSS would not have asset ownership, tenant only Subject to market conditions when lease(s) roll over Least costly scenario over 20 year term analyzed
13. Credit from Sale of Owned Facilities Value of owned properties have peaked and are now declining (40+ year old buildings) Proceeds from sale of owned properties were projected for application to future facilities costs Funds can be obtained from sale of three facilities (3600 Wake Forest Road, 2302 Noble Road, 4600 New Bern Avenue) if an option other than Status Quo is explored by the Board
14. Scenario Cost Analysis Results Analyzed over 20 year period *Includes application of proceeds from sale of owned facilities
15. Grubb & Ellis Recommendations: “It is our recommendation that the Wake County Board of Education pursue the Lease Consolidation scenario.” Downsize and consolidate into 175,000 SF of leased space Improve operating efficiency through better space utilization Achieve better service to the public with better program adjacencies Provide flexibility as needs change over time Secure leased assets at historically low prices & take advantage of available lease concessions Sell older depreciating assets & apply proceeds to future facilities costs
16. Recommended Next Steps On March 16, 2010, the Facilities Committee reviewed the Strategic Analysis and directed staff to pursue the lease option, obtain proposals on available space, and bring it to closed session for Board consideration. Move forward with lease consolidation; consideration of alternative sites and selection of a preferred location. Presentation of lease terms and fiscal analysis for review & approval by Board of Education. Presentation for review & approval of funding to Board of Commissioners. Presentation for review & approval to Local Government Commission 16 16