GSA’s Space Reduction Plan

Photo: Workspace Utilization and Allocation Benchmark Study, July 2011

On Federal News Radio this past Friday, Elaine Clancy, GSA’s Director of Leasing, was interviewed regarding GSA’s efforts at space reduction and consolidation and her answers underscored a broader theme growing ever louder at GSA: the Federal Government will get smaller.  As she stated in her interview, the Government-wide space utilization rate is about 247 SF per person and the goal is to reduce it significantly to about 150 SF per person (the specific number is 156 SF as outlined in several recent Prospectuses).  Before going further, we should note that the radio program didn’t distinguish between rentable and usable square feet and, therefore, overstated GSA’s proposed space reduction goal.  We are fairly certain, based upon our own research that the 247 SF figure is rentable and the 156 figure is usable.  If we gross up the 156 SF usable by 15% the equivalent is 179 SF rentable.  The  delta between GSA’s goal and current utilization represents a proposed 28% reduction in office space.  That’s still a big number.

The cynics among us will conclude that a 28% space reduction will never happen and we can’t disagree entirely.  At minimum, we would expect any reduction to occur over the course of years as leases naturally expire.  Further, space re-configuration and reduction may prove cost prohibitive for agencies in the short-term, despite the potential for long-term savings.

Nonetheless, we can expect that this policy trend will have certain implications for landlords:

1. Small leases will have an increased probability of being consolidated into larger ones.  If you lease space to an agency that is spread across several buildings, you’ll need to really study the situation to understand your renewal risks.

2.  Expect the GSA to execute more short term extensions to sync up lease expirations.  The mere act of doing this doesn’t signal definitively that a landlord will lose its tenant upon renewal, but it will create a new kind of competitive environment for that lease.

3.  Many lease actions will be subject – directly or indirectly – to new and intensive space planning and utilization studies.  These will almost certainly cause delays in getting procurements underway and that, in turn, will likely lead GSA to kick the can down the road with short term extensions.

4.  In those instances where GSA does look to renew, expect it to look to the Landlord for higher TI allowances to fund space reconfiguration.  The trend will be away from hard-walled offices and more to flexible open plans, hoteling and a healthy dose of telecommuting.

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