“On owned properties, the government should consider sale-leaseback options,” Connor says. “This would likely attract willing buyers and the government would see immediate, potentially significant, liquidity. Investors pay top dollar for buildings leased by the US government.”

With the depressed lease markets, on the other hand, Connor recommends the government sell buildings and generate liquidity, while securing long-term leases at historically low rates. And on the leased side, he says, the government has the greatest opportunity to trim its regional footprint, simply because of the pending expiration of existing leases

“Whatever actions it takes, the government needs to consider the human cost of consolidation, in terms of jobs lost and services cut,” Connor says. “But these are very difficult times and hard decisions have to be made. Hopefully, the Atlanta region will be treated fairly in the scope of the nationwide action.”

As Connor sees it, the government cannot continue to do business as usual and will be forced to take substantial measures to reduce debt, increase revenue, and cut costs. If the government reduces its footprint in metro Atlanta by 25% over the next three years, it will take 1.2 million square feet of occupied space from the market.

“First, a reduction of demand will put downward pressure on regional prices and rents,” Connor says. “Second, a domino effect across the region may cause a new round of CRE bankruptcies or abandonments that would further depress the region. Therefore, we may not yet have seen the bottom in Atlanta CRE, and a recovery to the pre-2008 level will be hindered by slow, or negative, regional economic growth.”