Efforts to right-size agency real estate portfolios are often stymied

The pandemic has accelerated conversations about the need for the federal government to right-size its space requirements and shed unneeded offices. The hybrid work model being embraced by the private sector has introduced a new paradigm, where offices are used for meetings, training and collaboration and heads-down work is performed mostly at home. 

Given that the federal workforce in the National Capital Region is overwhelmingly white collar and administrative, and seemingly a perfect fit for this new hybrid work model, why has the government been unable to effectively embrace this new normal and downsize its real estate footprint to match its actual space needs? The answer lies in some basic realities that agencies face, both in the federal budget process and how management functions compete with higher profile policies and programs. 

Probably the main structural disincentive for agencies to reduce their space is the annual federal budget process. Because “it takes money to save money,” agencies must spend funds to redesign and/or relocate and downsize their offices. 

But the zero-sum nature of the appropriations process means that any dollar for one program is a dollar unavailable for a different program. Thus, it is hard for major consolidation, relocation, and/or disposal projects to even make it into an agency’s annual budget request, much less receive approval from the Office of Management and Budget and funding from Congress. This situation predates the pandemic – agency career executives have long struggled with the fact that management issues aren’t “sexy,” and as such don’t rise to the level of the policy issues that political appointees are in place to effectuate. 

That reality, along with leadership’s tendency to prioritize decisions with short term impacts rather than long term benefits, plays an outsized role in agencies’ general inability to effectively manage their real estate portfolios. Note also that rare is the political appointee (average tenure: 18-30 months) willing to force their agency to give up space, embark on a major relocation, or accept some other strategy which could be unpopular “in the building.”

Another significant impediment to timely and substantive movement by the government on many of its real estate challenges is the relationship between the General Services Administration, the government’s landlord, and its tenant agencies. Even though at the working level the relationships often are quite good, GSA simply doesn’t have the muscle to make agencies do anything. And unfortunately, most agencies don’t have the expertise to effectively translate their own mission needs into an actionable real estate strategy.  

One result of this longstanding dynamic is that GSA tends to manage its business primarily as a service provider, rather than as an asset manager of its building portfolio. This limits GSA’s ability to recommend, much less enforce, more creative solutions such as agencies sharing headquarters buildings or vacating older, failing federal buildings for newer, smaller, leased locations. Thus, we see decisions that don’t make sense from a governmentwide portfolio perspective, and lengthy timelines as GSA and the agencies struggle to develop solutions to expiring leases, crumbling infrastructure, program growth, and the like.

Now the good news. Despite these structural impediments there is a path forward and relevant, recent examples exist. As with many things in government, all roads lead to OMB, which allocates resources and has far more influence than GSA over agencies and governmentwide initiatives.   

First, the Biden administration needs to pivot from the reactionary return to office mentality and officially embrace the new hybrid work paradigm, which clearly is the “new norm” nationwide. That in turn would release GSA to recommend more governmentwide, cross-agency real estate solutions, managing its inventory as a portfolio rather than as a service provider. In partnership with GSA, OMB could utilize the annual budget process to ensure that agencies are proposing the necessary one-time funding requests to make long-term investments in the buildings that GSA has determined make the most sense to keep. 

The tools are available to make the hybrid model work (and not just IT): the annual budget process includes real property as a line item, so there is a framework in which agencies can develop strategic plans, request funding, and implement (with GSA) the appropriate real estate projects to support the shift.  

Two great examples of a successful OMB and GSA-led approach were the Freeze the Footprint and Reduce the Footprint executive orders of 2012 and 2015. Those EOs initiated the last big paradigm shift in government office space, from mostly private offices to mostly workstations. They became the impetus for agencies to consolidate their portfolios and even to create new space allocation standards and union agreements that codified those space reductions.  Embracing the new paradigm and rightsizing government real estate will not happen overnight, but history suggests it can be done.  

Adam Bodner is a principal at ABodner Consulting and a board member of the Federal Real Property Association. He was a longtime federal real estate official and most recently was executive director of the Public Buildings Reform Board.