GSA Leasing: What are the challenges and opportunities that lie ahead?
From what I hear on CNBC from commercial real estate industry leaders is that the real estate industry is still on the upswing as the economy continues to improve. Consumers have more spending money in their pockets from lower fuel prices and are spending it on travel and resorts and airline fares are down. -- my round trip to
My last Chicago flight was so low ($119 roundtrip) that I upgraded to preferred seating for $25 each way without a second thought. REIT stocks are doing well, and GSA-leased build-to-suits seem to be commanding premium prices.
Investment companies are on a tear to acquire more government-leased property and current owners are enjoying the generally rising value of their portfolios. Consolidations in Federal buildings are gaining momentum, bringing in increased assignments for brokers, leasing agents and space planners; and as soon as the spending bills are passed and enacted there is going to be lots of money for assistance such relocation planning and moves, as well as equivalent dollars for R&A funds for remediation and modernization of aging federal buildings.
Challenges ahead will call for owners to conform their office space to GSA standards for the "office of the future" including greater open space, smarter, greener, more sustainable buildings. My most frequent question about lease renewals, is that investors want studies performed for build-to-suits and similar special-purpose government buildings (such as district courts, VA clinics, government warehouses, etc.), which is why it is not a good idea to put a squadron of young interns to work to research the data on this subject.
Here are a few of the challenges and opportunities that lie ahead from my perspective:
o Extending the GSA lease contract term to a minimum of 10 years
o Improving office space utilization that is more reasonable
o Streamlining leasing process even more
o Eliminating the backlog of expiring leases over the next two to five years
o Simplified lease acquisition threshold increased to above $500K
o Consolidated lease prospectuses
o Space utilization expanded to 170sq/ft all in or better
o Annual utilization reports filed with the House/Senate committee of jurisdiction (House T&I & Senate EPW)
o Federal Protective Service personnel need more training (GSA's RPSSS BPA could be utilized).
o Zero based space justification—prospectus level leases requiring replacement space, lease renewal or lease extension, shall require a justification for such space, including an explanation of why such space could not be consolidated or collocated into other owned or leased space.
o Federal Triangle Complex being sold or exchanged to generate funds to complete construction of GSA's Central Office (could also use the GSA’s RPSSS BPA). Net proceeds would go the Federal Building Fund (FBF)
o An independent agency such as the U.S. Comptroller of the Currency should conduct biennial audits of the latest version of the National Broker Contract to determine whether brokers selected under the program provide lower lease rental rates than GSA typically negotiates.
If you are an owner, developer or investor, I urge you to contact the principals at reputable GSA-leased property advisory firm, so that special lease renewal studies can be performed for your portfolio. Also, determine sensitivity to all the new rules, regulations and mandates being contemplated by Congress, OMB and GSA; and finally, analyze the marketability of your real state holdings and things of that nature.