HealthNow New York, in an effort to offset its expenses with some rental revenue, has consolidated some of its operations in its headquarters building and will sublease a portion of space to engineering and construction firm URS Corp., the health insurer and the Erie County Industrial Development Agency announced Monday.
The international engineering firm, which specializes in work for the oil and gas industry, will occupy all of the fourth floor in the complex’s north building at 267 W. Genesee St., according to the Buffalo-based parent of BlueCross BlueShield of Western New York. URS will move in March 1, taking 28,253 square feet for its local division.
About 110 professionals and staff are moving over from URS’ current location at 77 Goodell St., in the former M. Wile Building, which is owned by the University at Buffalo Foundation. Its lease there for 55,000 square feet expires Sept. 30, but UB wants the space for expansion of its activities at the Buffalo Niagara Medical Campus, so it is pressuring URS to vacate early, according to the ECIDA.
A spokeswoman for URS declined to comment.
ECIDA approved the transaction Monday morning at its monthly meeting. The eight-year sublease was subject to the agency’s approval because of 15-year tax breaks ECIDA originally granted in 2005 for construction of the HealthNow facility.
“Telecommuting has freed up some space. URS stays in the city. It frees up some space for UB. It’s a win-win for everybody,” said Chris Johnston, the IDA’s chairman.
The space that will be leased to URS will not be covered by the tax breaks that HealthNow received, which means about $270,000 in additional tax revenue for the city over the next 10 years.
“The URS space is being pulled out because it was never envisioned that this would be a multi-tenant facility,” said Karen Fiala, the IDA’s assistant treasurer.
Meanwhile, the building still has extra space. URS will occupy just 2.95 percent of the 957,000-square-foot complex, which includes a 469,000-square-foot office facility and an adjoining six-story parking ramp. The office space consists of an eight-story tower and a six-story building, connected by a seven-story atrium.
The $129 million project, located on a cleaned-up former brownfields site, was completed in mid-2007 by Duke Realty Corp. of Indianapolis. It was purchased in 2011 by Cole Real Estate Investments of Phoenix, which leases almost all of it to HealthNow. Commercial real estate brokerage firm CBRE also occupies about 5 percent of the building, on the first floor, but the rest still belongs to the health insurer.
The opportunity to sublease space came about after HealthNow used new furniture design and made better use of the building to consolidate staff from various departments and free up space without any layoffs. Indeed, spokeswoman Julie Snyder noted that the company actually employs more workers – 1,400 – than it did when it first moved in six years ago.
The idea resulted from a Lean Six Sigma review, and the goal was to be more productive and efficient, encourage collaboration among employees, and reduce administrative and overhead costs, HealthNow said. The company started by testing whether it could consolidate technical staff from throughout the building onto one floor, moving 165 people into the same space. That success was followed by bringing other departments into contiguous space as well.
Employees now use new and more compact work stations, with thinner computers, and they rely more on group work rooms, fully equipped and quieter office spaces that can be booked for special projects, and building-wide Wi-Fi so that employees can set up anywhere.
“It’s not that we have fewer people in the space,” Snyder said. “There have really been a lot of smart changes in how we work together here.”
The result was to reduce its own space need from 95 percent of the building to 75 percent, but it will continue to lease the full amount, which means it has room to grow, Snyder said. Meanwhile, it can use URS’ rent to offset what it pays the building owner, lowering its own costs.
“This is a smart and easy way to become faster, more fluid and nimbler in the wake of health care reform,” said Thomas A. Fentner, HealthNow’s senior vice president of human resources and administrative services. “Our building infrastructure can more than accommodate the needs of a sublease, with room to spare.”
Snyder said there are no plans to sublease more space.
“There are no mothballed spaces,” she said, but “we still have plenty of room to grow as the business demands.”