U.S. Departments of State and Housing to Shrink D.C. Real Estate

The federal government is downsizing even more Washington, D.C., real estate as part of the General Services Administration’s planned “optimization program,” which the Biden administration proposed in its 2025 budget in March.

The U.S. Departments of State and Housing and Urban Development (HUD) will soon reduce their real estate portfolio in the greater D.C. area, according to a report issued by the White House’s Office of Management and Budget on Aug. 9 and first reported by the Business Journals.

Spokespeople for either department did not immediately respond to requests for comment.

In its budget proposal, the Biden administration earmarked $425 million for the GSA — which acts as the federal government’s landlord for nonmilitary properties and owns or leases over 360 million square feet in over 8,000 buildings across the U.S. — to make its portfolio more efficient and less costly, Commercial Observer previously reported.

Now, the State Department has “plans to capitalize on three commercial lease expirations” in D.C. and Northern Virginia and will “densify staff from these locations into leased or federally owned facilities that are already within the department’s domestic portfolio,” the report said.

The State Department would save an annual $10.8 million with the moves and “shrink” its office space by 771,566 square feet, according to the report.

Meanwhile, HUD, which leases all of its facilities from the GSA, has reduced its real estate footprint by nearly 700,000 square feet between 2012 and 2023, the report said.

HUD said it is projected to minimize space by an additional 15,527 square feet in 2024 and has plans to reduce its portfolio by another 60 percent by 2038. In addition to reducing its field offices, that plan includes “collapsing” four headquarters satellite offices into the Weaver Building at 451 7th Street SW, the report said.

Through the rest of the decade, HUD said in the report that it will focus on “optimizing our space utilization while promoting a healthy working environment, enhancing sustainability, and being good stewards of taxpayer dollars.”

This comes after the GSA awarded a lease contract to Duwaliya US Real Estate late last month to consolidate two agencies of the Treasury Department at 1575 I Street NW. The Treasury’s Office of Management and Office of Technical Assistance will take 65,000 square feet of space, the Business Journal reported.

The consolidation will allow the agencies to vacate four leases in the D.C. area by August of next year, CO previously reported.

The GSA’s slashing of federal government office space comes amid larger efforts to reconfigure and repurpose existing leases as well as scrap properties it no longer needs. Office cuts seem to be increasing as developers realize federal facilities — which are on average more than 50 years old — are not structured for modern alterations.

Isabelle Durso can be reached at idurso@commercialobserver.com.