Tech Companies Shine Light On Opaque Government-Owned Real Estate
Governments own and lease more commercial real estate assets than any other entity around the world. The trouble is no one knows exactly how much. Two new tech companies are working to make it easier for real estate professionals to discover and work with government assets.
PublicAssets founder and CEO Skip Rudolf said the government commercial real estate market is about 15% of the total industry in the U.S. and is extremely active. San Francisco-based PublicAssets has about 5.5 million records in its database of government assets spanning the federal government, all states and the top 200 cities with a population of more than 50,000.
Sub-federal, or government entities not part of the federal government, own about 6B SF to 7B SF, or about 70% of what the federal government owns. The City of New York owns 450M SF. Among the assets of the Port Authority of New York and New Jersey is the iconic One World Trade Center.
Chicago owns 74M SF, Philadelphia has 35M SF and San Jose owns 125M SF of buildings and land, according to Rudolf. Comparatively, the federal government owns about 270,000 buildings and 2.8B SF.
In the U.S., 95,000 governments, special authorities and special districts own more than 3 million buildings and 650 acres of commercial real estate, which includes offices, stadiums, warehouses, hospitals and parking lots.
“With governments owning so much, they are in massive debt,” Rudolf said. “Municipalities on up have about $7 trillion in unfunded pension obligations and retirement obligations to former employees and no way to pay for pension obligations.”
Governments need to raise capital to pay their pension funds so they are starting to sell off assets instead of build them. That has meant they might sell and leaseback the space or simply look for space to lease instead of building and owning it.
Governments also are working more with brokers than previously. Among the biggest national contracts is CBRE’s partnership to lease or sell excess postal facilities on behalf of the U.S. Postal Service.
While people may think government-owned buildings are dusty and old, Rudolf said many are modern and can be pretty easily repurposed into offices or other uses, such as Google leasing Moffett Federal Airfield (Hangar One) in Mountain View an Sunnyvale.
Governments also lease significant assets as tenants. Among the largest leases is a 2.4M SF lease at 600 Dulany St. in Alexandria, Va., by the U.S. Patent and Trademark Office, which pays an annual rent of more than $72M. The City of Palo Alto leases about 16K SF from McCandless Limited.
To keep track of all these leases, PublicAssets joined forces with Capstak earlier this year to provide brokers and real estate professionals with a list of haves and wants for governments.
“Governments are leasing more space than ever and acting more commercial than ever,” Capstak co-CEO Michael Schnabel said.
Capstak provides a social network dedicated to commercial real estate professionals. Through its partnership with PublicAssets, professionals can look into when leases are expiring and connect with those government entities looking for space. This partnership will take away the need for cold calling prospective clients and provides a clearer picture of what governments need.
“Leveraging Capstak’s Haves & Wants proprietary technology, tens of thousands of formerly hidden opportunities to lease, dispose and acquire property will get exposure to local and national markets,” Schnabel said.
The partnership has already led to several deals that would not have occurred otherwise, according to Schnabel.
PublicAssets also is working with a company in Europe to review data of the top eight to 10 cities to figure out what they own and to create a real-time estimation of property values. A white paper is expected within the next few months.