Agencies’ headquarters in DC remained ‘nearly empty’ in 2023, real-estate board finds

Agencies are overlooking a prime opportunity to reduce the size of the federal real estate footprint and save billions of dollars in the process.

That’s coming from the Public Buildings Reform Board, an independent agency focused on selling valuable, but underutilized government buildings.

It finds agencies have more office space than the federal workforce needs, and the cost of maintaining this space keeps increasing. The board, in an interim report to Congress last month, said the “status quo of nearly empty federal buildings is not financially or politically sustainable.”

The report finds many federal buildings owned by the General Services Administration are over 50 years old, and showing their age at a time when the agency faces a multi-billion dollar maintenance backlog.

The report, however, adds that “there are several reasons for optimism.”

By selling or disposing of real estate they don’t need, agencies have a unique opportunity to reinvest their budgets in office space with modern amenities that will improve morale across the federal workforce.

Former GSA Public Buildings Service Commissioner Dan Mathews, the newest member of the PBRB, said in a recent interview that right-sizing the federal footprint would be a “win-win opportunity.”

It would ensure federal employees get better-quality workspace, and allow GSA to manage a federal real estate portfolio that’s more cost-effective for taxpayers.

“The purpose of the board has never been more relevant than today, given the really low levels of occupancy, Mathews said. “Basically having an empty federal building that no one’s going to doesn’t do anything for the local economy. It’s actually quite a harmful economic dead zone.”

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%.

The PBRB’s report goes one step beyond GAO’s data snapshot. The board analyzed commercially available, anonymized cell phone data at federal building locations across D.C., between 8:00 am and 6:00 p.m. and repeated visitation patterns to identify an estimated number of occupants for each building.

The board, in its report, said commercial real estate experts use this data extensively to establish use patterns.

PBRB’s data analysis finds the federal headquarters buildings operated at 12% of their estimated capacity, on average, between January and September 2023.

At a maximum, the U.S. Agency for International Development saw 26% occupancy of its headquarters building during this period.

Meanwhile, data shows the headquarters for the U.S. Agency for Global Media reached, on average, 2% of its building capacity.

The PBRB’s data analysis finds an even lower utilization rate at the Energy Department. But the board concedes “this number is likely to be flawed,” and has reached out to the department for clarification.  The board said it did not receive a response from the department before publishing its report.

Overall, the board finds that the median occupancy at federal workspaces in 2023 is 30% lower than 2019 levels.

“The taxpayer is spending a tremendous amount of money to house an extremely small number of people in buildings that, frankly, are pretty awful, oftentimes. They’re spending a fortune there, they’re not getting much for it, and the outcomes are bad,” Mathews said.

While many federal buildings in the D.C. metro area require federal employees to swipe in with a government ID to get into their office, Mathews said this card-swipe data is hard to come by for  government buildings beyond the Beltway.

“If you don’t have the right data to know, is that actually happening, that makes it challenging,” Mathews said. “Buildings are incredibly expensive capital assets. If you don’t know how those assets are being used, it’s really difficult to manage them effectively.”

As the federally owned building portfolio ages, Mathew said many sites require repairs and upgrades that are so costly that GSA would see no return on investment with the projects, in terms of the rent they would be able to charge federal agencies, or would lose money in the process.

“In those situations, they should be looking towards a leased solution. If they cannot generate a return on investment for a federal building, that should be on the path of disposal,” he said.

In the case of the Transportation Department headquarters, for example, it makes sense to renovate. The building is less than 20 years old, in great condition, and has low total occupancy.

“You could easily have additional Department of Transportation components occupy that building at a relatively low investment level,” Mathews said.

By comparison, most of the major systems in the Labor Department’s headquarters are past their useful life, and that the building has a low occupancy rate.

The PBRB report finds the Labor Department’s Frances Perkins Building has approximately $382 million in deferred maintenance. The board also estimates that it costs about $18 million a year to operate and maintain the building .

On top of this yearly operating and maintenance cost, the department pays GSA about $40 million in annual rent.

“The amount of money you’d have to spend in that building per foot, you’re just not going to be able to pencil that out — you’re not going to get a return on investment on that,” Mathews said, adding that many other federal buildings fall into this category.

“They are so empty, that there is no prospect that they are going to fill those up. And their capital liabilities are so high that you couldn’t justify renovating that building, even if you could fill it,” he said.

In fiscal 2022, the 24 largest federal agencies owned nearly a quarter million buildings, covering more than 2.4 billion square feet, according to the latest GSA data. That portfolio of owned buildings accounts for more than $16 billion in annual costs.

When it comes to right-sizing federal office space, Mathews said the low-hanging fruit isn’t the “monumental” historic federal buildings on Constitution Avenue, but rather the mid-century buildings built in the 1950s and 1960s that Mathews said are often “an eyesore, and also have massive capital liabilities.”

“GSA doesn’t have enough money to take care of all of them — you’ve got to make hard choices. It’s pretty clear which ones you ought to be getting rid of, and which ones you ought to be putting your capital into, and investing so you can keep them in good condition,” he said.

Mathews said the board’s data should help the Biden administration as it implements its return to office efforts.

“When the federal government unencumbers large swaths of federally locked down properties that have inherently valuable locations, you’ve seen tremendous economic development, growth, value creation that didn’t exist before,” he said.

“The [National] Mall is like New York City’s Central Park. It’s one of the most heavily visited locations on the globe. But yet, you get a few blocks off the mall, particularly south of the mall, and it’s just empty federal building after empty federal building. But the potential there is truly tremendous over time,” he added.

Congress created the Public Buildings Reform Board as a small, independent agency under the 2016 Federal Assets Sale and Transfer Act (FASTA), to help GSA identify federal buildings and properties that agencies no longer need, and to sell or repurpose them.

The board, under FASTA , is scheduled to disband in May 2025. But its members say agencies, with lessons learned from the COVID-19 pandemic, have a “once-in-a-lifetime” to get rid of office space they no longer need.

The board, however, has run into several hurdles. The Office of Management and Budget rejected a whole slate of its recommendations from the PBRB in January 2022, on the grounds that it was “unable to conclude that the risks to the government posed by the disposition of the proposed properties are acceptable to the taxpayer.”

Mathews said some of the board’s challenges have been “disappointing and surprising.”

“OMB is required to do certain things under the law. They’re supposed to get data from agencies — recommendations for disposals. For the last two years, they haven’t even made the request,” Mathews said.  “I was shocked at just how often PBRB requests information and they don’t get it.”

The board’s next and final round of recommendations is due to OMB by December 2024. PBRB, according to its interim report, is looking at 27 properties with about 13 million usable square feet.

The House in March passed the FASTA Reform Act, which extends the termination date of the PBRB to Dec. 31, 2026, and would give the board additional authority. If the bill becomes law, the board would create a fourth round of recommendations for sale and disposal.

“Congress fully understands the needs for this is great. And it’s bipartisan — this is not a partisan issue at all,” Mathews said.

Over the coming months, Mathews said the board will continue to meet with agencies to discuss the board’s recommendations for selling and disposing of underutilized federal buildings.

“If keeping this property within the federal property is not really defensible any longer, what’s the alternative? Obviously, the agencies have to be involved in that process,” Mathews said.

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