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Federal Government May Need To Slash 5M SF In Leases Under New Budget

The General Services Administration is looking to spend money to save money in the long term, with plans to slash leased office space by 5M SF.

The Lipinski Federal Building in Chicago, one of 23 federally owned properties up for sale.

The GSA is requesting $425M in President Joe Biden’s proposed $7.3T fiscal year 2025 budget to reconfigure and renovate federal buildings to accommodate more workers and quicken the sale of unneeded federal real estate, the agency announced in a press release

While the move comes as the Biden administration ratchets up pressure on Cabinet heads to get federal employees back to the office more often, the GSA is looking to reduce its total leased space for federal tenants from the 173M SF it rented in 2023 to 168M SF by next year, CoStar reported. The GSA’s plan also involves consolidating workers into federally owned buildings rather than leased space, spending a proposed $1.6B on repairs, electrical upgrades and exterior work. 

The net result could save taxpayers $1B over the next decade by not having to maintain underused real estate, the GSA said. 

“The President’s Budget reflects critical, targeted investments that will accelerate GSA’s efforts to right-size the real estate portfolio, ensure the secure and effective use of technology across government, and lead the way toward a clean transportation future,” GSA Administrator Robin Carnahan said in the release. “These sound investments will yield big returns for taxpayers — from reducing real estate leasing costs to making smart, efficient use of technology across government.” 

Many federal workers have been on hybrid schedules since the beginning of the pandemic, which has led to chronic underuse of owned and leased space by federal agencies. In early 2023, the Government Accountability Office analyzed 17 agencies' combined 21.5M SF of headquarters and found workers were occupying 25% or less.

The GAO found that federal agencies spend $2B a year to operate federal office buildings and an additional $5B a year on commercial real estate leases. 

The proposed budget will also help accelerate the GSA’s previously announced plan to sell 23 federally owned buildings, including the Nebraska Avenue Complex and the Webster School building in Washington, D.C., the Lipinski Federal Building in Chicago, the Williams Coast Guard Building in Boston, the Shea Federal Building in Santa Rosa, California, and the Swain Federal Building in Cheyenne, Wyoming.