Lew Sichelman

You’re not the only one working from home: So are thousands of government workers. And as a result, Uncle Sam’s office needs have changed dramatically. 

Now, the Government Accountability Office, the investigative arm of Congress, has called on the government’s property manager to help numerous agencies consolidate their office needs. This could save millions of dollars – and perhaps provide an opportunity for the private sector to revitalize any vacated spaces. 

Use your imagination to consider what a savvy developer could do with a 17-acre former government site in Menlo Park, California. It has 17 buildings that could be converted to apartments or condominiums. Or consider a 14-acre former missile site in Gaithersburg, Maryland, where there’s great demand for housing of all types and the zoning is flexible. 

Key Info Not Shared 

Some 17 major federal agencies have already made limited changes to their leased and owned office space because of the pandemic and the uncertainty about how their employees will work going forward. A majority expect to reduce the number of leases or square footage in their real estate portfolios, primarily in response to teleworking. 

The General Services Administration – the independent agency which, among other things, is responsible for the feds’ office space – has also expanded its space-planning and data collection efforts. And 20 of the 24 agencies polled by the GAO are collecting similar data on their own. 

The majority of the agencies believe that the information gathered by the GSA would help them better understand their own future space needs. But the GSA initially had no plans to distribute the data, which the GAO’s latest report called a costly mistake. 

“By not planning to more broadly share this information,” the GAO report said, “GSA is missing an opportunity to provide a clear understanding of how the potential cost of collecting such data could be outweighed by the long-term benefits, including potential cost savings from reductions in future annual rent, maintenance and other operational costs.” 

Known as the government’s watchdog, the GAO said the GSA should develop a plan to distribute what it learns with federal agencies, including those that don’t use its real estate services. 

Not So Fast, Developers 

The GSA has agreed, and has stated it will communicate “lessons learned” from its pilot programs and data collection activities. But this is your government at work, so no one – especially builders, developers and investors – should expect to get their hands on excess property anytime soon. 

Like most governments, Uncle Sam works slowly. How slowly? Well, the government is woefully behind on another effort to reduce the federal footprint: a pilot program enacted by Congress in December 2016 to expedite the sale of unneeded and underutilized federal real estate. 

It’s now been six years since Congress passed the Federal Assets Sale and Transfer Act (FASTA) to create the Public Buildings Reform Board (PBRB). It took time to get the board up and running; then the pandemic hit, and then two of the five board members resigned. President Joe Biden appointed Jeffrey Gural to chair the panel in July, but he has yet to be confirmed. 

Disposing of federally owned real estate has always been a challenge. Indeed, the process has been on the GAO’s high-risk list for nearly two decades. The 2016 law was supposed to change that, but so far, it has not worked as planned. 

“It is probable that the FASTA process will not meet expectations or provide insight into ways the federal government can more effectively reduce the federal real property portfolio,” the GAO said in a report late last year. 

Staffing Problems Shortchange Effort 

It wasn’t until December 2019, three years after the board was created, that it finally identified 11 “high-value” properties for sale in what was to be a three-round process. As of January, only one sale had actually closed. But now, 10, including the two mentioned above, have changed hands at auction. 

The GSA does not reveal the names of the buyers or what they paid. But according to press reports, the largest bid for the old Veterans Affairs medical center in Denver was $41 million. In Sacramento, the city paid $12.3 million for 80 unused acres at a Job Corps Center to build housing for people who are currently homeless. 

Meanwhile, the PBRB moved ahead with the next round of offerings last December, which included 15 properties. But the second phase was shot down by the Office of Management and Budget, which didn’t like the board’s methodology. OMB gave the board 30 days to respond. But since the PBRB doesn’t have a quorum, it couldn’t – effectively canceling the second round, at least for the time being. 

The first round was expected to generate $500 million to $700 million in proceeds that would be plowed back into the program to keep it moving. The second round was expected to net up to $2.5 billion – resulting, the board estimated, in $275 million in long-term savings to taxpayers. 

By law, meanwhile, the third and final round cannot occur until at least three years after the second round, effectively pushing it until 2025 at the earliest. 

Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com. 

Slow Going for Federal Real Estate Sales

by Lew Sichelman time to read: 4 min