Why the Federal Government Can’t Shake Its Empty Office Space

“What we’re going to tell Congress, I think, is that agencies could achieve that savings if they could get over that hurdle that they all have to have their flagship buildings,” Walden told the Property Council.

A representative from the U.S. Government Accountability Office (GAO) was there. That representative spoke up in support of Walden’s observation. The GAO was doing just that, in fact: It had for years leased some of its flagship space to the Army Corps of Engineers to use as a headquarters. 

Would that other federal bodies were just as amenable. 

As it stands, the federal government has a lot of excess office space, and the volume is unlikely to shrink soon. A laborious review process for potential sales, resistance to sharing office space, and the pushback from government leaders — and commercial real estate lobbyists — virtually ensures the excess and its cost will endure. 

The GAO surveyed 17 federal agencies over three weeks during the first three months of 2023. These agencies utilized an estimated average of no more than 25 percent of their headquarters buildings’ capacity, according to congressional testimony in July from the GAO’s acting director of physical infrastructure. On the higher end, the agencies might use up to 49 percent of their headquarters space.

What’s more, the General Services Administration — the federal government’s civilian real estate arm and usually the final say in Uncle Sam’s office footprint — has 4,108 office leases expiring within the next five years representing more than 83 million square feet, or about 30 Empire State Buildings, according to the same GAO testimony. 

The numbers, too, suggest this glut of office space isn’t fueled just by a pandemic that forced most of the federal workforce to turn remote and stay at least partly that way. As recently as fiscal year 2020 — which ended Sept. 30, 2020, roughly six months into the pandemic — the federal government owned 12,670 vacant, unused buildings and another 3,023 that were partially empty, according to a Congressional Research Service analysis. 

In a political era that now includes one of the more portentous presidential elections in the nation’s history, when both major parties are braying about cutting the budget, unloading unused office space should be a quick way to do it. It costs $2 billion annually to operate and maintain those 17 agencies’ buildings, however much they’re used. It’s another $5 billion a year — give or take, per the GAO — to lease the buildings. 

The federal government as of July owned 511 million square feet of office space. (For comparison, the Manhattan office market runs to around 465 million square feet.) That means the real estate operating and maintenance costs of the government as a whole likely far exceeds these multibillion-dollar figures for the 17 agencies. Much of that same federal government remains on a hybrid work schedule in which employees don’t go into the office every workday. 

“This is a golden opportunity for government to reduce its footprint,” said Deborah Collier, vice president of policy and government affairs with watchdog Citizens Against Government Waste. 

Federal agencies and other bodies have indeed long been expected to shed unused space through transfers, sales or even demolitions. Such shedding, though, is often interminably gummy and fraught with challenges.

The Public Buildings Reform Board seemed like a giant step forward when Congress created it in 2016. The board would recommend to the GSA and to the federal Office of Management and Budget which properties to sell or otherwise dispose of. It was loosely based on the Base Realignment and Closure process the Defense Department has used to decide where to close or merge military installations.  

The PBRB did not meet until 2019, and made its first recommendations in October of that year. They were initially rejected — the OMB and the GSA had the decision-making power, not the board. The recommendations were pared and then resubmitted. Ten of the 15 originally recommended properties were ultimately sold for more than $193 million. 

A second round of proposed property sales crashed in January 2022 against pushback from other agencies, what the OMB deemed a lack of information, and resignations from the board, which prevented it from reaching a quorum to vote. President Joe Biden eventually nominated two more members — New York landlord Jeff Gural and former Massachusetts Congressman Mike Capuano — to bring the board to five. Its next recommendations are not supposed to come before December 2024. After that, it’s anyone’s guess: The board’s remit is up for congressional renewal in May 2025. 

Before his 10 terms in the U.S. House that ended in 2019, Capuano was the mayor of the densely populated Boston suburb of Somerville. The city knew the details on every building it owned, and could therefore move quickly if it needed to sell one, Capuano said. Not so for the federal government, he said he discovered after Biden nominated him for the PBRB. 

“The most amazing thing to me is how little information the government has on its property,” Capuano said. 

“When I voted for [the PBRB] — and I can’t speak for any other member of Congress — it wasn’t just to sell properties. It was to figure out what the problems were in selling properties,” he added. “Why does it take so long to sell properties, even when you decide you want to sell them?”

A lack of readily available information is one thing. Opposition — from sources as myriad as activists, local governments and Native American tribes — can stymie a trade, too. A Seattle site of the National Archives was among the first tranche of properties the PBRB recommended for sale at the end of 2021. But tribal governments, the State of Washington and area members of Congress fought the decision to sell because they said it would impact locals’ ability to access records there, and so the recommendation was dropped.

“The current process is a very cumbersome process,” Capuano said. “A lot of those encumberments have been put on for good reason — environmental concerns, homelessness concerns, community input concerns — all of which are legitimate. But the question is, do they currently work for the current system for individual buildings?”

Then there’s agencies’ resistance to collaboration, known as the “silo mentality.” The GAO survey revealed a reluctance among agency heads to share office space. 

“One official said their leadership is reluctant to share headquarters space with other agencies because it could lower their perceived standing as a Cabinet-level agency,” according to congressional testimony from a GAO official in July. “Eight agency officials also ranked inner-agency silos as the first or second biggest challenge to increasing headquarters utilization.”

The silo mentality persists even as much of the federal workforce remains hybrid. Concerns about redundant work, even national security worries, fuel the mentality — never mind the straight-up pride the GAO survey revealed. Walden, the PBRB’s sole full-time employee, said he has a cubicle at the GSA headquarters.

“I think one thing they’re struggling with is if, indeed, all these government office buildings in D.C. are 20 percent occupied and will stay that low even after the agencies finalize their revised telework plans and all that,” Walden said, “I think there’s a mindset that ‘I can’t co-locate with an agency with a similar mission.’ ”

The siloing affects not only efforts to sell off underutilized office buildings, but also to end or otherwise curtail leases. The GSA can make many of those final decisions by itself, just as it can help decide the fate of underused buildings. 

The agency has been cagey about its plans. The GSA’s Real Property Disposition wing did not respond to a request for comment about expiring leases or about an ongoing agency review of its holdings. The GSA’s media office did not answer questions about the agency’s plans. 

Robin Carnahan, whom Biden named GSA administrator in 2021, told Commercial Observer in a late September interview about GSA’s environmental sustainability efforts that the agency was considering its leases on a case-by-case basis. It was also accounting for sustainability in any decisions about what to cut. 

“As we think about rightsizing and optimizing the federal portfolio, we need to think about our leased buildings as well as which buildings we keep in our federal inventory that are owned buildings and which ones we dispose of,” Carnahan said. “All of this is really driven by our agency partners and customers and what their needs are. And, it’s no secret, everybody’s sort of rethinking what the basic needs are.” 

Federal leaders have rethought things. For the most part, they’re pushing in-office work, which further complicates efforts to dispose of unused federal office space. In fact, getting more of the federal workforce back to their  desks for more of the workweek appears to be one of the few policies on which Democrats and Republicans agree. 

On Feb. 1, the GOP-led House, with some Democratic support, passed the SHOW UP Act of 2023 (as in Stopping Home Office Work’s Unproductive Problems Act). It aims to restore federal telework policies that were in place in 2019 before the pandemic — in other words, allowing a lot less of it. The Senate has yet to pass a version of SHOW UP. 

A few months later, the Biden administration released guidelines designed to ease more workers back to their offices. The guidelines, released through the Office of Management and Budget, were couched in assessing “organizational health and organizational performance,” and do not explicitly mention filling underused space as a motive. 

“It is the expectation that as a part of these assessments agencies will continue to substantially increase meaningful in-person work at federal offices, particularly at headquarters and equivalents, while still using flexible operational policies as an important tool in talent recruitment and retention,” an April 14 memorandum from OMB Director Shalanda Young read. 

That memorandum came one day after the Real Estate Roundtable, a Washington, D.C.-based lobbying group, issued a public plea to the Senate to curtail remote work for federal employees. The letter, signed by Roundtable President Jeffrey DeBoer, leaned into the economic fallout from remote work, especially a lack of foot traffic for restaurants and retailers as well as the potential loss of property taxes.

“Remote work for some workers likely is here to stay,” DeBoer’s letter read.  “[H]owever, returning to the workplace for a significant portion of the workforce is vital to rebuilding and growing America’s post-pandemic economy.”

The D.C.-area office market in particular would shrivel without the federal government. It is far and away the region’s largest office tenant (as it is for the country as a whole). The D.C. region continues to struggle with historically high availability. That rate stood at more than 22 percent in the third quarter — same as the quarter before — according to brokerage Savills. At the same time, the bulk of the 1.2 million square feet in leasing activity in the quarter — 435,000 — came from the federal government. 

Meanwhile, the board meetings, the sales, and the research to curb federal space and cut billions in annual costs — all of that quietly continues parallel to the more public efforts to roll back in-office policies to 2019. 

“There’s no reason why they couldn’t share some of their spaces,” Citizens Against Government Waste’s Collier said of agencies. “This is really, truly a way for the government to reduce its cost impact to taxpayers.” 

Tom Acitelli can be reached at tacitelli@commercialobserver.com.