Item - 2018.EX34.4

The Executive Committee:

1.  Requested the Deputy City Manager, Internal Corporate Services, in consultation with the Director, Real Estate Services, the Interim Chief Financial Officer, the Transition Lead of CreateTO and the Chief Planner and Executive Director, City Planning to develop an Office Optimization Plan for the City‑wide real estate portfolio, and to report back to City Council in the first quarter of 2019 with an initial business case and implementation plan that identifies:

a.  core office assets to be occupied by the City on a long-term basis for office purposes;

b.  non-core office assets to be monetized, disposed, developed or repurposed for alternative uses;

c.  an implementation plan for modernizing and operating the City's office portfolio, including projected costs, revenues, timelines, resources and requirements for execution, including flexible workplace opportunities for City staff.

2.  Requested the Deputy City Manager, Internal Corporate Services to consult and work collaboratively with all City Divisions, Agencies and Corporations, regarding the City's Office Optimization Plan and to realize opportunities and efficiencies for the City‑wide benefit.

The Executive Committee considered the item at 4:00 p.m., or as soon as possible thereafter.

The purpose of this report is to present strategic principles and directions to optimize the City-wide office portfolio over a multi-year period and phased approach. The plan will assist to address the modernization and transformation challenges highlighted in the City of Toronto Long Term Financial Plan to deliver on Council's directions. Leveraging a new City-wide real estate mandate approved by City Council in May 2017, City staff will establish a City-wide portfolio plan for all Agencies, Corporations and Divisions.

The City-wide office portfolio accommodates over 15,400 employees across 3 million square feet of office space, including 52 owned and leased locations. The office optimization plan aims to rationalize the portfolio, promote greater co-location opportunities and generate long-term cost savings of 10 to 15 percent. The plan will also focus on transforming the office environment for today's employee and business operations. This includes modernizing office spaces, providing flexible workplace solutions and enabling a connected workforce, generating improvements in employee experience and enabling effective public service delivery. Office modernization has been successfully tested with pilot projects in City buildings, providing measurable financial and operating benefits. Advancing the initiative across the City-wide portfolio will require a committed, up-front investment and a coordinated, multi-year plan. The optimization plan will identify City-owned buildings to be repurposed, third-party leases to be eliminated, opportunities to support mobility, and areas to improve collaboration and connectivity across the City-wide portfolio. Cost savings and revenues generated by the plan will justify and support future long-term investments in modernization.

Past reports on office modernization focused on office space standards and pilot projects. This report takes a City-wide approach to scale the modernization efforts across the entire office portfolio. Within the portfolio of 52 office locations, there are three asset types providing accommodation solutions, including Civic Centres, corporate office buildings and leased facilities. City staff estimate that the optimization plan could save the City $7 million - 10 million in annual operating costs (once fully implemented), by using space in more efficient, coordinated manner. Future costs will also be managed by accommodating growth needs within existing City space. City staff will report to Council with specific recommendations on City assets and policies, including an initial business case and a multi-year implementation plan, in the first quarter of 2019. Opportunities will be quantified based on the City's ability to achieve co-location, reduce leases, densify owned space, improve space modernization and/or dispose of City‑owned office facilities.