OMB says agencies will get rid of ‘significant’ amount of office space in coming years

The Biden administration says federal agencies are shedding unneeded office space and plan to trim millions of square feet of it in the coming years as many federal employees work a blend of days in the office and days working remotely.

The Office of Management and Budget, in a comprehensive report released earlier this month, said federal employees eligible to telework are working in their offices about 60% of the time.

The hybrid schedule will allow agencies to reassess their office space needs and shed excess leased and government-owned properties.

“As agencies make longer-term decisions about their telework and work environment posture, they are also considering the impact of these changes on their real estate portfolios,” OMB wrote. “Agencies have undertaken significant work to shed unnecessary real estate, reduce costs, and improve overall real estate utilization.”

OMB asked 24 of the largest federal agencies to report on their efforts to reduce office space and also to provide more details on actions they are taking to better utilize their buildings.

By some estimates, federal building occupancy rates in the Washington metropolitan area will be about 30% lower in 2023 than they were before the pandemic.

Agencies tell OMB they have already shed hundreds of thousands of square feet of office space and plan to shed millions more square feet of space in the coming years.

“OMB expects all agencies to create thoughtful, competitive, and sustainable work environments that enable them to succeed in both the short and long term, and that they appropriately manage their real estate portfolios to support those decisions,” the report stated.

OMB is also developing occupancy rates that will require agencies to calculate average occupancy rates for their buildings. Lawmakers have requested this type of data from agencies and have been frustrated that the data isn’t more widely available.

HUD plans to give away 60% of its office space

Agencies offer different timelines for selling properties and differ in how much office space they are willing to give up.

As an extreme example, the Department of Housing and Urban Development plans to eliminate as much as 60% of all office space by 2038.

HUD plans to reduce the size of its field office off the Beltway and consolidate four D.C. branch offices into its downtown headquarters building.

“These reductions will enable us to use funds more efficiently and reduce our property expenses, allowing us to allocate funds to other needs with greater impact,” the report reads.

HUD occupies more than 4 million square feet of space, consisting of 80 leased buildings across the country and four headquarters buildings.

Meanwhile, the Energy Department has unveiled plans to get rid of more office space than any other agency. The department told OMB it plans to get rid of 3 million square feet of office space by 2027.

The Defense Department said its Washington Headquarters has terminated leases for 561,000 square feet of space over the past five years and returned 275,000 square feet of space to the landowner, the General Services Administration, for use by other tenants.

GSA said it has reduced its federal footprint by more than 2 million square feet over the past 10 years, avoiding more than $300 million in operating and maintenance costs.

“In 2024 and beyond, GSA’s internal real estate portfolio will focus on right-sizing workspaces,” GSA told OMB. The agency plans to vacate leased space and “transform, reconfigure, and/or supplement existing space” in at least six regional office buildings and its DC headquarters.

The Government Accountability Office found last summer that all of the agency’s headquarters buildings in the Washington area had excess space, including 17 that had an average occupancy of just 25%.

The OMB report said agencies do not currently collect data to calculate average office occupancy rates, but OMB plans to develop occupancy rates that in the “short term” would require agencies to calculate average annual occupancy for their buildings.

Officially unused office space represents more than 23 million square feet of space in GSA’s Federal Real Property Portfolio. This unused space represents more than $69 million in annual operating and maintenance costs.

“Many agencies recognized that they had more office space than they needed before the pandemic and continue to face challenges in adequately sizing their real estate portfolios, including a lack of funding from Congress to reconfigure and consolidate office space to meet mission needs,” the report said.

The average age of GSA-owned buildings is more than 50 years. OMB notes that “older buildings are not efficient or optimally configured for modern operations and often require significant modifications.”

Current and former officials overseeing the federal government’s sprawling real estate portfolio say federal buildings have gone unused across multiple administrations — but the COVID-19 pandemic has made the problem too obvious to ignore.

However, OMB notes that some agencies may not be fully utilizing space due to decreasing staff numbers and may not have the funds to move to smaller buildings.

“It is important to note that ‘underutilized’ office space is often a required asset in a given location by one or more agencies,” the report states. “The cost of maintaining an existing asset that has become underutilized due to staff reductions, for example, may be a more cost-effective option than building a smaller building that would be fully utilized or renting commercial office space.”

GSA is also asking Congress for full access to the Federal Buildings Fund, where it holds rent payments from tenant agencies. Lawmakers have allocated about $1 billion from the fund annually for more than a decade to cover other costs.

Over the past decade, lawmakers have taken more than $13 billion from the fund, delaying needed repairs and limiting GSA’s ability to consolidate office space for agency tenants.

GSA is asking Congress for $425 million in “optimization” funding in next year’s budget. The funding would help agencies move out of underutilized office space.

The House and Senate versions of the fiscal year 2025 spending package do not include the Biden administration’s request to create a federal building optimization fund at GSA.

However, both versions included a provision requiring GSA to submit recommendations on how to reduce federally leased and owned space that has a occupancy rate of less than 60 percent.