* Will cut 1,700 jobs by year end, 4,500 by 2016
* Will relocate Calgary head office to rail yard in city
* Explore options for surplus real estate
TORONTO, Dec 4 (Reuters) - Canadian Pacific Railway, Canada's second biggest rail carrier, said on Tuesday that it would cut 4,500 employee and contractor jobs by 2016, as it pushes to dramatically cut costs and improve its operating efficiency.
New Chief Executive Hunter Harrison said the railway would also relocate its headquarters from downtown Calgary to a rail yard it owns in the city, and consider the sale of surplus real estate.
The company, which repeated its pledge to reach a 65 percent operating ratio target by 2016, will also review options for its Delaware and Hudson Railway Co line in the U.S. Northeast.
An operating ratio, which measures a company's operating expenses as a percentage of its revenue, is a key indicator of rail industry efficiency. The lower the number the better.
CP, the least efficient of North America's big six railroads, had an operating ratio of 74.1 percent in the most recent third quarter.
CP also said it will would introduce a longer siding program to increase train length, which will allow it to move the same or greater volumes of material with fewer trains.
Earlier on Tuesday, the company said it was exploring options and partnerships for the western part of its Dakota, Minnesota & Eastern Railroad.