GSA doubles down on shedding federal office space. The next administration may alter its plans

The General Services Administration is doubling down on efforts to sell or dispose of office space that agencies no longer need.

In 2023, federal building utilization rates in the Washington, D.C. metro area remained about 30% lower than pre-pandemic rates, by some estimates. To address this issue, GSA last fall added 23 federal buildings to its sale and disposal process.

Elliot Doomes, commissioner of GSA’s Public Buildings Service, says GSA is working on another list of federal properties it plans to start offloading in fiscal 2025.

“These are assets that we just don’t need,” Doomes said Tuesday in a webinar on the future of federal real estate hosted by BisNow Media.

Over the last four fiscal years, GSA has reduced its footprint by almost 8 million square feet, and over half of its 8,000 leases are coming up for renewal in the next five years.

“I would expect that most agencies will not be renewing at the same footprint that they have now, and that our stakeholders on Capitol Hill are going to demand reductions,” Doomes said.

Current and former officials who oversaw the federal government’s sprawling real estate portfolio say GSA is stepping up efforts to get rid of its aging and underutilized buildings, and bring federal employees into more modern office space.

Those experts say GSA will keep consolidating the federal real estate portfolio, at the urging of Congress, regardless of the next administration — but that the methods will vary, depending on if former President Donald Trump wins reelection, or if current Vice President Kamala Harris becomes president.

GSA owns 36.7 million square feet of building space in the National Capital Region. The agency says about 2 million feet of space is currently vacant.

The Government Accountability Office found last summer that all agency headquarters buildings in the Washington, D.C. area had excess space, including 17 that had an average building utilization of just 25%. Doomes recently lawmakers think the GAO report’s results are “concerning.”

Doomes said Tuesday that GSA is doing a “deep dive” on its owned portfolio, and looking at properties that agencies no longer need.

“We’re deciding what are core assets, and then we’re looking at some of our assets that have significant deferred liability, that have a negative [funds from operations], and where don’t expect there to be an uptick in demand for space for federal workers. And we’re trying to dispose of those assets,” Doomes said.

In 2023, GSA sent 29 prospectuses for major construction or renovation projects. So far, lawmakers have approved all but eight of them.

“If there’s a prospectus that has not been approved, it’s likely because there are outstanding questions about the utilization rate that Congress is demanding we answer before they approve those prospectuses,” Doomes said.

Among their questions, Doomes said lawmakers are asking about agencies’ return-to-work policies, and how many federal employees are showing up to the office on any given day.

“The committee staff are asking very granular questions about these prospectuses. They have to sell this to the members of Congress in order to get this approved. And the members of Congress, they read the papers, they see that we have low utilization rates, they see that 17 of 24 CFO act agencies have utilization rates below 25%. And they’re asking some pressing questions of, do we really need this space?”

Underutilized office space: ‘The elephant in the room.’

Former PBS Commissioner Bob Peck, who led the office during the Obama administration, said many federal buildings remained underutilized across multiple administrations — but that the COVID-19 pandemic made the issue too obvious to ignore.

“Before there was the elephant in the room of COVID and return to the office, there was a previous elephant in the room — although it seemed to be invisible to a lot of people — which was the utilization rates were always lower than people thought,” Peck said.

“When I was at GSA, we started to say, ‘We’re at way too much square feet per person,’” he added. “And when you took a look at how many people actually utilize the space, we realized that we never saw more than about a 70% office occupancy on a given day.”

Dan Mathews, who served as PBS commissioner during the Trump administration, said Trump, if reelected, would likely require federal employees to return to the office more often.

Mathews is also the newest member of the Public Buildings Reform Board, which is helping GSA identify underutilized buildings it should sell.

The Biden administration is requiring federal employees to return to the office about 50% of the time, although implementation of this policy varies agency by agency.

“There is way too much supply in the federal inventory, not nearly enough demand. What happens with the election, the demand equation could change significantly. That will change the demand side of this whole equation,” Mathews said about a new Trump administration. “I don’t think it would go back 100% of the way it was pre-pandemic. There will still be some consolidations and reductions, but it’ll be nothing like what is required, if the status quo today becomes the long-term status quo. If that’s what this is looking like, then there’s a radical realignment of the federal portfolio.”

Mathews added that another Trump administration will likely consolidate GSA’s portfolio of owned buildings by shifting more agencies to lease office space.

“If you look at most of the properties that we disposed of during the Trump administration, we moved the tenants out of those buildings and put them in leases. It was the fastest way to get them off those properties. It also was the most cost-effective way to do it in terms of access to capital, and the flexibility to be able to expand or contract in the future. That was the key to getting out of the owned portfolio and selling the buildings,” he said.

‘The entire portfolio is going to shrink’

The Trump campaign and its advisers have commented on the federal workforce’s increased use of telework since 2020, but have yet to articulate a full-fledged policy around it.

The Heritage Foundation’s Project 2025, a policy blueprint crafted by former Trump administration officials, states that “COVID made telework ubiquitous, but the law and regulations are still stuck in an era when telework was unique.”

The policy document also remarks on the Department of Veterans Affairs’ use of telework at the height of the pandemic.

The document advises that a new Trump administration “take a close and analytically critical look at where hybrid and remote work is a net positive as a functional necessity and where in-person collaboration and presence will help to instill a strong work ethic and a more cohesive environment for productivity.”

“The short-term and long-term effects of this policy on the department are unknown, but generally, the policy may be undermining the cohesiveness and competencies of some staff functions and diluting general organizational accountability and responsiveness,” the document states.

The VA is exceeding the Biden administration’s return-to-office goals, and is requiring teleworking employees in the National Capital Region to work in the office at least five days each two-week pay period.

Trump has tried to distance himself from the policies outlined in Project 2025. But on his own website, he has called for a mass relocation of federal employees out of the D.C. metro area.

“As many as 100,000 government positions could be moved out — and I mean immediately — of Washington, to places filled with patriots who love America,” Trump said in a video on his website posted in March.

The Trump administration moved the headquarters of the Bureau of Land Management from D.C. to Colorado, and also relocated hundreds of Agriculture Department employees to Kansas City, Missouri.

Peck said regardless of the election’s outcome, the next administration will take steps to reduce the federal real estate portfolio.

“The entire portfolio is going to shrink, which means there will be fewer federal buildings that you’ll need to maintain, no matter what,” Peck said. “You can move people out into leased space a little bit quicker than you can dispose of a federal building.”

Doomes said some agencies — like the FBI and VA’s Veterans Health Administration — are not conducive to telework, but most federal office jobs are telework-friendly.

“The reality is, it’s unlikely these people will ever come back to work, because then it becomes an issue of retaining the best and the brightest employees, who are now demanding that they be able to telework, and people do leave federal agencies based on telework options,” he said.

Peck said that since the Obama administration issued directives to freeze and reduce the federal government’s real estate footprint, GSA has seen more of a reduction in leased office space than in GSA-owned federal building space.

At least in D.C., the feds are lower on a return-to-work basis per week than the private sector. And the private sector is settling in at maybe three to four days a week. The feds look like they’re quite a bit less than that. And that’s obviously reflected in both the owned inventory, and in the leased inventory.”

However, the Congressional Budget Office that found federal employees, on average, are working remotely less often than private sector employees.

Funding to consolidate federal buildings

GSA-owned buildings are, on average, over 50 years old, and showing their age. The agency is also dealing with a multi-billion-dollar maintenance backlog.

Former PBS Commissioner Norm Dong, who held office between March 2014 and March 2017, said GSA owns more buildings than it can afford to keep in good working order.

“The mantra at GSA has been, ‘Federal ownership is good. We need to reduce our reliance on leasing,’ and I think there’s truth to that,” Dong said. “But you have to be nimble and understand what’s going on, particularly as it relates to the costs of maintaining and renovating these federal buildings. After a while, the economics no longer work, where leasing gets much more attractive. And I think GSA needs to take more of a nuanced approach to really understand what’s going on in the market right now.”

“Will you ever be able to kind of create a modern office environment in many of these pre-war buildings? Or should you be finding an alternative use for these aging federal buildings and rethink the composition of the portfolio?” he added. “I think the reality is setting in — or needs to set in — in terms of, you’re never going to get the capital dollars that you need to maintain the entire own federal portfolio. You need to rethink the composition, and you need to rethink the strategy.”

Doomes said GSA under his leadership realizes the need to offload federal buildings that the agency can’t afford to maintain.

“We’ve always started off with the baseline assumption that owned is more cost-effective for taxpayers. But the underlying assumption in that assertion is that the Federal Building Fund works as intended,” he said. “It hasn’t.”

Congress since 2011 has diverted about $1 billion each year from the Federal Buildings Fund to cover other agencies’ budgets.

Doomes said Congress siphoning off these funds has delayed investments in federal buildings, and limited opportunities for agencies to consolidate office space.

Doomes said Congress, since 2011, has skimmed more than $10 billion from the Federal Buildings Fund. He recently told a Senate committee that said delays in carrying out these projects have driven up the total cost by about $300 million, and prevented agencies from moving forward with consolidation efforts.

GSA, he added, has overseen about 89 projects where agencies consolidated office space over the past eight years. But agencies have also missed about 120 opportunities to consolidate office space because of a lack of funding.

Doomes said GSA is asking Congress for full access to the Federal Buildings Fund, “with a promise that are going to use that money to accelerate our efforts to dispose of some of these older buildings.”

“Right now, it’s an ask. And it’s what I spent a lot of time at my congressional hearing earlier this morning saying — ‘This is what we need. I agree, Congress, we do need to reduce the footprint and shrink the footprint. But it’s going to take money to get that done,’” Doomes said.

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