The federal government is the largest owner and occupier of office space in the United States. In 2012, the official “Freeze the Footprint” policy issued by the Office of Management and Budget (OMB) directed federal agencies to avoid further increases in real estate inventory. Then, in 2015, the “Reduce the Footprint” follow-up policy required agencies to tighten utilization rates and shrink the size of the leased portfolio.  These efforts reduced the federal footprint by 23 million SF across the U.S. between 2012 and 2023.  While more than half of this reduction was concentrated in the National Capital Region, the trend has been observed nationwide.

Colliers Insight

Source: General Services Administration

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What Is the Focus Moving Forward?

Today, the federal government’s priority is to use space more efficiently. For example, large leases requiring a congressionally approved “prospectus” must contain a housing plan identifying current versus new square footage and clearly signal that the General Service Agency’s (GSA’s) largest lease requirements are being programmed to result in a net reduction of space.    Because both OMB and Congress must approve each prospectus, these reduced housing plans effectively telegraph the continued interest of Congress and the administration in tightening utilization and reducing the inventory of leased space.  Moreover, the tenant agencies also improve space efficiency by pursuing new leases with even less square footage than Congress approved.

Colliers Insight

Marianne Skorupski

“Today, the federal government’s priority is to use space more efficiently.”

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Process to Reduce Obsolete Inventory

Historically, the GSA, the nation’s largest public real estate organization, has disposed of excess federally owned real estate via online auctions on a federal website.  But this process can be slow and cumbersome, often exposing bidders to significant historical preservation and entitlement risks.  In 2016, Congress passed the Federal Asset Sale and Transfer Act (FASTA) to streamline disposing of the largest and most prominent excess assets, including the use of professional brokerage firms.  While the GSA initially awarded a contract for such brokerage services, it ultimately abandoned that effort, and the auction process persists.  However, Congress and the Public Buildings Reform Board (an independent agency created by FASTA) have renewed the push to improve the process, including brokerage services.

What will be the new teleworking approach?

While many agencies have long-standing telework programs, their recent willingness to reduce space needs beyond Congressional requirements stems largely from the massive expansion of telecommuting in the early days of the COVID pandemic. Even though OMB and the White House have since encouraged agencies to reverse their policies and bring employees back into the office, highly elevated levels of teleworking persist.  For example, a  Government Accountability Office (GAO) report found that most federal agencies use 25% or less of their headquarters space.  So, while pressure appears to be building for some higher level of “return to office,” most agencies have embraced hybrid working models and are unlikely to revert to pre-pandemic levels of telework.

Opportunities Ahead

The foundational shifts in the federal government’s approach to leasing and the disposal of underutilized federal real estate will create opportunities. Largely vacant federally controlled buildings devoid of office activity and retail spaces can depress urban economic activity and development.  In Washington, D.C., for example, this impact is uniquely acute, given the heavily concentrated footprint of federally leased and owned inventory. The number of empty federal offices there and elsewhere has raised questions about whether the government could more aggressively dispose of such properties, thereby saving millions (and potentially billions) of dollars on maintenance and overdue capital costs.  Moreover, disposals could encourage private investment in these communities and return valuable real estate to local tax rolls.  The GSA may eventually have a unique opportunity to right-size and modernize the federal office footprint, reduce the waste of taxpayer dollars, and bolster the very communities that the federal government serves.