Future Of Federal Office Use Still Uncertain As Election Approaches

Though Democrats and Republicans don’t see eye to eye on much, they do agree that the federal government has much more office space than it needs. 

But as many federal agencies still haven't solidified their long-term plans for hybrid work, stagnation has taken hold on office leasing decisions, federal government real estate pros said Tuesday on Bisnow’s Future of Federal Real Estate Digital Summit.

“The biggest elephant in the room is the uncertainty that these agencies are up against as to what their utilization will be for their space and how many employees are coming back to work, what those requirements will be,” said Bob MacKichan, partner at law firm Holland & Knight and former general counsel for the General Services Administration. 

Right now, the Office of Personnel Management directs employees to report in person at least two days per biweekly pay period. But there are stark divides between agencies in practice, with individual federal unions holding a strong influence over remote work policies.

And orders from the Biden White House pushing agencies to bring workers back in have done little to move the needle forward. A survey conducted by Federal News Network this spring found that 30% of the over 6,000 federal workers who participated were fully remote, 6% were fully in-office, and the rest were navigating a hybrid schedule.

“I think the administration has been sending very mixed messages to the agencies in terms of what the [return to office] policy should be,” said Norman Dong, partner at FD Stonewater and former commissioner of the GSA's Public Buildings Service.

Part of the market's uncertainty involves not knowing who will be in charge of the federal government's real estate next year, but the presidential election in November should create more clarity. 

“Depending on what happens with the election, the demand equation could change significantly,” said Dan Mathews, who served as the PBS commissioner in the Trump administration. “That's probably the most important variable going forward — about how much demand is going to be for office space — is what happens with the election.” 

“If it's a Trump administration, people are going to have to come back more,” said Mathews, who is now a member of the Public Buildings Reform Board. “That will change the demand side of this whole equation.”

Whether it is a Donald Trump or Kamala Harris administration, panelists agreed that the size of the federal footprint will be cut, panelists said. But Trump is likely to be more bold.

Project 2025, a platform written by former Trump officials and published by the Heritage Foundation, calls for cutting the number of federal workers and closing “wasteful and corrupt” bureaus, The Wall Street Journal reported. And Trump has said he wants to abolish the Department of Education, which houses more than 2,500 employees in D.C., per the WSJ.

In a video on Trump’s campaign website, he vows to relocate “as many as 100,000 government jobs out of D.C.,” WUSA9 reported. The 45th president already has a track record of moving agencies out of the D.C. region and reducing their headquarters footprints.

Mathews expects that Trump would be especially aggressive in moving federal agencies from owned buildings to leased space, a strategy he undertook during his first term.

“If you look at most of the properties we disposed of during the Trump administration, we moved the tenants out of those buildings and put them in leases,” he said. “It was the fastest way to get them off those properties. It also was the most cost-effective way to do it in terms of access to capital, and the flexibility to be able to expand or contract in the future.”

Regardless of what policies the government pursues, panelists said more clarity is needed. 

“Whatever the government decides, there need to be some standards that people can rely on and standards other than the preference of the employees and the preference of the agencies, which seems to play out often in just not wanting to ruffle feathers with their own employees,” said Bob Peck, co-chair of Gensler's government practice and former PBS Commissioner. 

And the Executive Branch needs to be the one to make the call.

“This is the White House — that's where it's got to come from,” Mathews said. “Every department reports to the president at the end of the day. If the president says you're coming back, they're going to come back or they're going to leave.” 

In the meantime, agencies have opted to extend and delay real estate decisions, keeping extraordinary amounts of space with very few workers still coming into the office. And the GSA has been slow to dispose of agency headquarters, given that agencies still can't definitively tell them how much space they will need.

“So what they've done is they've just renewed existing space, maintaining the same space requirement with a very low utilization of that space,” MacKichan said. 

There isn’t much data showing how much space is actually used across the GSA’s leased or owned properties nationwide, but there have been two recent studies about its footprint in the nation’s capital. 

In March, the Public Buildings Reform Board published a report in which it analyzed usage of 23 agency headquarters in D.C. and found that, on average, they were using just 12% of their footprints. A Government Accountability Office report released last summer found that 17 of the 24 agencies it studied used 25% or less of their headquarters buildings.

Elliot Doomes, who oversees the government's real estate today as PBS commissioner, said the GSA is seeing more employees come back slowly but surely, and it will take some time for the dust to settle.

“We're getting better and better numbers every day about how many people are coming into the space and how much space agencies need,” he said. “I think a year or two from now we will have reached equilibrium in how often people will come into work, and we will be able to rightsize the federal footprint.”