The Federal Government is accelerating efforts to reduce its real estate footprint. GSA has aggressively moved to terminate leases, even before agencies complete their utilization assessments. Our latest analysis examines recent GSA lease terminations, their subsequent rescissions, and what agencies can do to advocate for their space needs.
Read the full analysis and understand the shifting landscape of federal real estate management below.
Federal Push to Reduce Underutilized Space
In the aftermath of the July 2023 GAO report, which found that agency headquarters buildings were being utilized at 25 percent of full capacity, the Federal Government has launched a full court press to shed underutilized space. In January, Congress passed the Water Resources Development Act, which includes a series of public buildings reforms focused on right-sizing the federal footprint. By July, the new law requires federal agencies to measure their building’s utilization followed by a public report on those metrics no later than January 2026. The new law also strengthens the role of GSA and requires the agency to take action for any federal building that does not meet a 60 percent utilization threshold.
GSA Advances Portfolio Reduction Strategy
As Congress has enacted legislation to compel the Federal Government to act more quickly, GSA is bringing a much greater determination and resolve to reduce the federal footprint - far greater than anything we have seen over the past two decades. In January, GSA announced its intention to reduce its owned and leased portfolio by 50 percent. Since then, GSA has been moving quickly to reduce its leased footprint. In many instances, GSA is taking action to terminate leases even before federal agencies have the opportunity to measure their buildings utilization and follow the process prescribed by Congress under the recent statute.
GSA Lease Terminations and Subsequent Adjustments
GSA has been targeting leases in their “soft” term, where the government had the flexibility to terminate leases, typically with 120-days’ notice. Of the total number of 7,505 leases in the GSA inventory as of February 1, there are nearly 2,895 leases in their soft term. Since then, GSA has exercised its contractual right to terminate 821 leases and has indicated that additional lease terminations will follow.
These lease terminations happened very quickly, and in some cases, perhaps too quickly. Of the 821 leases that GSA has terminated since February, GSA has subsequently rescinded the termination notices for 145 of these leases. The initial decision to terminate these leases may have occurred with little to no agency input or consideration for utilization levels and the mission need for these facilities. The subsequent rescissions of these lease terminations suggest that these conversations are now taking place.
Upon closer examination of the GSA lease terminations and subsequent rescissions, there are patterns that are emerging among federal agencies. Table One shows those agencies with the highest rate of GSA lease termination rescissions:
TABLE ONE: AGENCIES WITH HIGHEST LEASE TERMINATION RESCISSION RATE
Table Two shows those agencies with the lowest levels of GSA lease termination rescissions:
TABLE TWO: Agencies with Lowest Lease Termination Rescission Rate
There are some clear and distinct patterns that can be seen across these different federal agencies. For example, GSA recently terminated 16 leases for the Office of U.S. Attorneys, only to rescind all 16 of these lease terminations a few weeks later. Similarly, with the Internal Revenue Service, GSA terminated 62 IRS leases but eventually restored 50 of these leases. In contrast, of the 92 leases occupied by the Department of Labor that GSA recently terminated, only one lease termination has been rescinded.
So what is going on here?
As GSA begins engaging tenant agencies in a more meaningful way, the Federal Government is sharpening its portfolio management approach. In some cases, the decision to rescind a lease termination may reflect a clear mission need and the risk of operational disruption with the closing the facility. Moreover, when GSA makes the decision to terminate a lease, it is responsible for finding the agency adequate replacement space and for covering the cost of agency relocation into the new space. In some markets, GSA may simply not have sufficient space in its existing inventory to accommodate the agency’s space requirement.
The GSA lease termination rescission data might also suggest that some agencies simply have been more effective than others in advocating for their leased facility needs. GSA’s portfolio management strategy remains a work-in-progress. The experience during the first few months of the new administration suggests that GSA will continue to support agency facility requirements when there is a clear and compelling operational requirement. As GSA embraces its statutory mandate to manage the federal real estate portfolio more aggressively, agencies should maintain a strong voice to advocate for their mission needs.