Empty Halls, Full Bills: Inside the Federal Government's 2.8B Square Foot Real Estate Empire

With us being 2 weeks away from President-Elect Trump’s inauguration and his stated intentions to focus on reducing waste in government through efforts such as DOGE (Department of Government Efficiency), I decided to deep dive into all of the federal government’s real estate portfolio data. The numbers are eye-opening.

The Numbers:

• $18B spent annually in rent, operations and maintenance of all owned and leased buildings
• 2.8B square feet of space under management
• 70+% of leases expiring within 5 years
• 6% reduction in office footprint across portfolio in 2023
• 20% avg. utilization in headquarter buildings across all 24 agencies

We’ve heard various figures of how much the federal government spends per year in leasing, operating and maintaining the office spaces for its 2.3MM federal employees. But what is it really? According to the FRPP FY 2023 data, the government spends $8B per year renting, maintaining and operating its 600 million square foot office space portfolio. Let's break this down:

• $2B for operating owned buildings
• $6B for operating and leasing rented buildings
• 355 million sq ft of civilian space across 15,575 office buildings
• 245 million sq ft of military space (Army, Navy, Air Force)

The GSA manages the lion's share with 255MM square feet (90MM in DC alone) across 4,211 buildings, spending $4.8B yearly to rent, operate and maintain these office spaces. It’s worth noting that several major agencies, including the Department of Education, HUD, and the Social Security Administration, exclusively operate through GSA-managed spaces.

The Lease Situation:?

So how much exactly does it cost to rent and operate a federal office building per year? Well, according to the FRPP data, operating costs run about $4.70/sq ft, while leasing costs an average $30/sq ft.

But here's where it gets interesting – looking at their lease portfolio:

• Over 6,300 buildings are in "hold over" status (meaning they're operating on expired leases)
• Another 7,300+ leases will expire within the next 5 years
• Only 4,700 leases are considered "long-term"

In total, more than 50% of GSA's entire lease portfolio will expire within the next 5 years. And here's a little-known fact that could be a game-changer: most federal lease agreements include a 90-day termination clause. This clause gives the government great flexibility to rapidly consolidate its real estate footprint without waiting for leases to expire.

Space Utilization: The Elephant in the Room?

Okay, I saved the best for last, how well is the government making use of these spaces? While the self-reported FRPP data shows only 1,500 of 30,000 buildings as un- or underutilized, recent studies tell a different story.?

A GAO study found just 9% peak utilization in at least a quarter of surveyed buildings (21.5 million square feet of usable office space). Another study found that Federal agencies are using on average only 12% of their headquarters space, the latest in a growing body of evidence that the federal government is sitting on a mountain of unused office space.

What could GSA do?

1. Immediate Action: Dispose of 1,500 underutilized office buildings and 3,800 other buildings. This would free up 30MM sqft and save $5.1B over 10 years (or $4B without deferred maintenance). Selling half could generate $700MM at current rates.
2. Smart Monitoring: Install sensors at building entrances for 8-week traffic studies (~$5,000/building). Any building below 20% capacity? Time to dispose or end the lease.
3. Deep Utilization Studies: For remaining buildings, implement floor-level monitoring at $0.20/sq.ft. Institute a "use it or lose it" policy - maintain 60-70% utilization or face disposal. Perhaps, a percentage of the savings can be given back to the affected agencies as incentive. This would allow bringing together different agencies to share the same building while getting rid of more space.

And how much would something like this cost? The truth is that you have to spend money to save money, but case studies like this one showcased a 125:1 ROI. Given that the private sector achieves these returns with much higher baseline utilization rates (35% vs the government's 12%), the optimization opportunity here isn't just big - it's unprecedented.

The Good News:

Change is already happening. Rep. Scott Perry is pushing for reform through various bills, including the USE IT Act and MOVE Act. GSA's number one mandate for the next 18 months is: “disposing of underutilized assets, reducing leases, and fully optimizing space to better serve the changing needs of the post-pandemic Federal workforce”. Their Public Buildings Service Commissioner Elliot Doomes told members of the Senate Environment and Public Works Committee in July that “The trend is agencies are giving up space.”. “We’re bringing our workspace experts to work with these agencies to say, ‘How often are people there? What kind of work do you do? Maybe you don’t need all that space.’ Let’s give some of that space back.”