State Renegotiating Building Leases

by Kristina Rasmussen State government is trying to save money by taking a closer look at the building leases that house agency offices. From the State-Journal Register: The cash-strapped state government has been terminating leases all across Illinois and renegotiating others with the goal of saving money. The Department of Central Management Services says it has cut...

by Kristina Rasmussen

State government is trying to save money by taking a closer look at the building leases that house agency offices. From the State-Journal Register:

The cash-strapped state government has been terminating leases all across Illinois and renegotiating others with the goal of saving money. The Department of Central Management Services says it has cut its lease costs by $20 million in recent months through consolidations, relocations and renegotiations.

Cutting excess space and getting a better deal on existing leases should be an easy thing to support.

“As a budget director, I love those numbers,” said David Vaught, budget director for Gov. Pat Quinn. “You eliminate excess space or rent, you save that every year. It’s an efficiency savings. It doesn’t eliminate a program.”

In some cases, because of government cutbacks, more space was being leased in some buildings than was needed by the agencies there. Vaught said the options for the state were to renegotiate the lease for less space or negotiate a lease that accommodates more employees from another location, move them in and cancel the lease at the other location.

You’ll remember that managing real estate was a recommendation from the Taxpayer Action Board:

The State estimates that it currently holds 60 million square feet of space, through ownership of 50 million square feet and lease of another 10 million square feet. The State also has an estimated two million square feet or 3%, in excess space. Currently, the State pays an estimated $10 to $30 per square foot depending on the use and location of the property.

We encourage the State to take advantage of the opportunity to generate potential cost savings by divesting its excess space, a strategy that could yield the State $20-60 million (based on average cost of $10-$30 per square foot at the time of sale).

A Council on Efficient Government could help government apply the principles behind the lease review to other parts of government. Seems like a no brainer.