Even the Government Is Paring Back on Leased Office Space

The federal government is one gigantic office tenant. And a new General Accounting Office report says that, in a survey, most agencies are planning significant cutbacks in the amount of space they use.

The General Services Administration, or GSA, is the federal government’s property manager. “GSA leases space for agencies from other federal agencies, public entities, and private-sector lessors in commercially owned buildings,” the report stated. “As of March 2022, GSA managed 7,760 leases, totaling nearly 180 million square feet. Rent costs for these leases are about $5.7 billion annually.”

In addition, “There are more than 19,500 federally owned buildings, including approximately 511 million square feet that are considered office space.”

The total leased number lacks a breakout of how much of the space is in commercially owned buildings. A relatively small amount, 525,000 square feet, was terminated or on leases allowed to expire, in response to the pandemic.

However, the total amount of leased space is destined for a much bigger reduction. The GAO surveyed 24 federal agencies on plans to reduce leased space. Of those, 16 said they would reduce the number of leases and 19 planned to reduce square footage over the next three years.

Here are a few examples. Currently, the Department of Agriculture plans to modify 50 leases and return more than 1 million square feet of space due to increased telework and remote work. The Department of Education expects to reduce square footage by half for future leases and return the entire leased space at Potomac Center in Washington, D.C.

“Moreover, according to GSA officials, a large number of anticipated lease expirations in the next few years provides an opportunity to dramatically alter the federal government’s real property footprint and potentially save billions of dollars,” the GAO said. “As of March 2022, more than half of GSA’s leases (4,325 out of 7,754), which account for more than 88-million square feet of space, have expiration dates scheduled for calendar years 2022 to 2026. While agencies will extend some of these leases or move to other spaces, according to GSA officials, in a post-COVID-19 environment agencies are likely to significantly reduce their demand for federal real estate due to changes to telework and remote policies.”

Decisions could happen with little warning to building owners, as well. “GSA leases typically have a date after which GSA can terminate the lease with as little as 90 days’ notice,” explained a footnote in the report.