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WASHINGTON, DC-It is no secret that the federal government is clamping down on the space its agencies use. A memo sent recently by Jeffrey Zients, acting director of the Office of Management and Budget, to the heads of the Executive Branch agencies, reiterates that view.
“As of the date of this memorandum [May 11] agencies shall not increase the size of their civilian real estate inventory. . . . acquisition of new Federal building space (where approval of such acquisition occurs following the date of this memorandum) that increases an agency's total square footage of civilian property must be offset through consolidation, co-location or disposal of space from the inventory of that agency,” he writes.
The message from the Obama Administration, Congress and others in Washington is clear—and completely understandable—about the government’s use of real estate, says Joseph Brennan, Jones Lang LaSalle’s managing director tells GlobeSt.com. “They’re saying, and are completely right, that they need to practice austerity and be skilled and aggressive in the disposal.”
The problem is that, without more guidance, it is difficult for the agencies to know how to proceed. “If an agency has to decrease its use of real estate by 20%, fine—but how does it do that?” Brennan asks. “Should they eliminate programs? Fire employees? Reconfigure space? If it’s the latter, where will the capital come from to invest in that configuration?”
For the government to reap the benefits of a streamlined real estate footprint, Brennan suggests, it needs to take a few additional steps: “It has to suggest ways and provide means of implementing this goal.”
From a practical perspective, this lack of guidance is keeping local deals from closing. Brennan points to an active lease on the market, the Centers for Disease Control and Prevention. Located in Rockville, MD, and occupying 180,000 square feet, the agency has been struggling with how to reduce that square footage to 110,000 square feet, Brennan says.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
