Colliers recently released its U.S. 2021 Investor Sentiment Survey Results, an annual look at the mood of the investor community at the start of the New Year. Not surprisingly, more than half of all investors surveyed…

With over 1,000 leased facilities, often in single-tenant buildings, the Social Security Administration (SSA) is a staple of many federal investor portfolios. Like other federal agencies, however, SSA has been dutifully implementing the “Reduce the Footprint”…

The government real estate sector is the largest in the United States. It’s also the most complex because the government’s procedures for acquiring, managing and disposing of real property are subject to layers of regulations, policy, legislation and executive orders. Making sense of it all can be challenging, but Colliers’ Government Solutions team understands how to chart a path to successful execution. In everything we do, we apply a team approach, leveraging the depth and experience of Colliers’ large and diverse global platform.

Our platform consists of four services specifically focused on government real estate: Leasing, Investment Sales, Property Management, and Project Management.

• Property investors are looking for an edge in leasing space to the federal government. They want someone to guide them through the sometimes murky process, determine how to create winning proposals, maximize asset value and ensure that the lease will stand the test of time. Colliers Government Solutions makes the process manageable and we help position our clients to achieve successful results.

• In an uncertain global economy investors are turning to the security of government-leased investments. Federal, and even certain state- or municipal-leased assets provide solid credit but underwriting the lease structure can be foreign to many investors. To yield the highest value and best deal execution Colliers Government Solutions offers GSAXCHANGE, a team of sales professionals specializing solely in the sale of government-leased properties.

• Skilled property management is vital to owners of government-leased properties. The manager is the owner’s day-to-day representative and the primary interface with the government tenant. No one has a greater influence on the agency’s satisfaction and, ultimately, the probability of renewal. Colliers understands this and that is why we have developed a property management service tailored specifically to government-leased properties.

• A unique feature of government leases is that they typically require that property owner to be responsible for the tenant’s buildout or alterations, both at the outset of the lease and throughout its term. Therefore, it’s essential to have a skilled project management team on call. Colliers Government Solutions provides skilled project managers but we take the service a step further: we provide professionals experienced with the unique challenges of these government assignments, such as small business subcontracting, managing multiple stakeholders within GSA and the tenant agencies, and keeping to the schedule.

The title of a new report by the US General Services Administration (GSA), issued on January 30, 2020, speaks volumes: “Child Care Centers in GSA-Controlled Buildings Have Significant Security Vulnerabilities.” The 30-page report that follows, drawing…

Which federal agency began moving into its current headquarters building on November 22, 1963—the day President John F. Kennedy was assassinated? The Federal Aviation Administration (FAA)—the national aviation authority of the United States—has the power to…

OMB Controller Danny Werfel (photo: whitehouse.gov)

As it noted in a White House blog posting by Office of Management and Budget (OMB) Controller Danny Werfel Thursday, the Obama Administration has made disposing of unneeded properties and making more efficient use of the government’s real estate assets a priority for federal agencies. As the next step in this effort, Werfel has issued a management procedures memorandum that directs all Executive Branch departments and agencies to implement a “Freeze the Footprint” policy for federal real estate.

That guidance (also issued yesterday) clarifies the Administration’s policies as announced in the “Real Property” section of OMB Memorandum M-12-12 last May, which stated that agencies must “not increase the size of their civilian real estate inventory,” subject to certain exceptions, and required any agency that increases its square footage to offset any new space through “consolidation, co-location, or disposal of space from the inventory of that agency.”

The new guidance requires all agencies to develop plans that will serve as the basis for action to restrict the growth in their real property inventories, noting that an “agency’s total square footage for office and warehouse space shall remain at its FY 2012 baseline level” and specifying how that baseline is to be calculated. It also requires agencies to develop internal controls related to square footage growth, to facilitate increased communication between their chief financial officer and real property management offices, and to work collaboratively with other agencies and with GSA “to find opportunities for smarter space usage through co-locations and consolidations.” All of these requirements are designed to improve management of the federal government’s real property assets.

Specifically, each agency must develop and submit to GSA a three-year Revised Real Property Cost Savings and Innovation Plan by May 15, 2013, and every third year thereafter. According to yesterday’s memorandum, “This plan will be a revision of each agency’s 2010 Real Property Cost Savings and Innovation Plan with a narrower focus, and prospective analysis of real property spending for the next three fiscal years…” The plan must contain the following elements:

• A plan to maintain the agency’s FY 2012 footprint;
• Documentation of leasing costs, including the total dollar amount the agency spends on federal and private sector leases and an analysis of how it plans to control leasing and other space costs in the future;
• An “explanation of efficiency” that specifies actions the agency is taking to improve how efficiently it uses its space; and
• A “description of internal controls”—the methods and procedures that the agency is using to comply with the “Freeze the Footprint” policy.

The memorandum also calls on GSA and OMB to begin taking additional actions to improve the consistency and accuracy of information used to measure agency performance. And it directs OMB to review agency compliance with the “Freeze the Footprint” policy on an annual basis and to make that information—including each agency’s square footage baseline and annual progress—available to the public on Performance.gov.

What does it mean?

What does it mean for lessors? Well, for starters, “freezing the footprint” means exactly that. Though there are policy exceptions, we can expect the inexorable growth of GSA’s space inventory to be substantially abated. Theoretically we should see GSA’s inventory get smaller but in reality it will probably continue to grow. However, the reason is not because of net demand growth but rather because various agencies that had previously leased space under their own delegated or independent authority are rolling their leases into GSA’s inventory upon their expiration. One notable example of this is the SEC, which lost its leasing authority last year. That agency has about 2.5 million square feet of leases in locations across the United States. All of this will migrate to GSA control.

Freezing the Footprint will also force agencies to confront some difficult budget decisions. Downsizing is difficult to do, especially when the purpose of it is to accommodate the same number of people in less space. That often requires a complete re-configuration of the premises, which is difficult to do in-place. The alternative, of course, is to move to another building–tabula rasa–but that can be pricey for different reasons. It also assumes suitable alternative buildings are available.

Or, agencies can simply increase the number of people who telework. Now the agency can shrink its space (maybe by purging a few leases) and allow more people to work from home. For agencies this approach has been popular because it has the advantage of easily meeting space utilization goals and (by the metrics that the government tracks) it reduces real estate costs substantially. Further, the path for this has been cleared by the Telework Enhancement Act of 2010, which requires that the federal government provide teleworking opportunities to a substantial portion of its employees. A GAO report issued last year concluded that nearly 169,000  federal employees were teleworking at least one day a week. Based upon our anecdotal observation, we are certain that number has continued to grow.

Expect to see federal inventory growth slow substantially and also expect federal civilian employment to flatten and possibly decline, returning to levels seen during the Clinton and G.W. Bush Administrations.

In January 2018, then–Secretary of the Interior Ryan Zinke announced a sweeping program to reorganize the department, the largest such reorganization since its founding in 1849. Zinke’s plan involved dividing the United States into thirteen regions,…

The U.S. General Services Administration (GSA) leases private property at a cost of billions of dollars—$5.7 billion annually, to be precise, spread out over more than 8,000 leases. Every year, the agency claims, it saves taxpayers…

The Bipartisan Budget Act of 2013 has sparked a faint glow of optimism that agencies will plan more strategically for their space needs in the coming years. Last spring, a Government Accountability Office (GAO) report estimated that maintenance and operations of unused federal courthouse space cost the government $51 million per year, and in September, the Judicial Conference of the US voted to require a 3% reduction in space inventory by the end of FY 2018. Now a new report from the GAO explicitly recommends better planning by the GSA and the judiciary for future uses of un-needed courthouses.

Since 1993, 66 old courthouses have been replaced or supplemented by new facilities built by the GSA. That agency, not the judiciary, determines the fate of old courthouses, based on considerations of building condition, historic or architectural significance, future occupancy interest by the judiciary, local market conditions and needs of other federal tenants in the area. The Federal Property and Administrative Services Act of 1949 provides the basic process for determining how to dispose of courthouses deemed excess, as shown in the figure below from the GAO report. Notably, if the GSA fails to identify local, state or federal government or other public use for a property, it can begin planning for a private sale.

The GAO found that it takes about 1.4 years for the GSA to dispose of unneeded courthouses, attributing many delays to aging structures with historic value that do not meet court security standards. With a goal of making more efficient use of federal real estate, the GAO examined GSA and judiciary management in three areas:

• How retained courthouses are used and related challenges;
• How excess courthouses are disposed of; and
• How the future use of old courthouses is considered in GSA proposals for new courthouses.

Data were collected on 66 courthouses replaced or supplemented in the past 2 decades, and GSA officials, judges and judicial officials were interviewed for their perspectives on courthouse disposal and reuse. Also, 13 courthouses, representing a mix of retained and disposed buildings around the country, were investigated as case studies.

The results of the analysis, conducted between November 2011 and September 2012, are eye opening. By the end of the study, nearly 2/3 of the 66 courthouses were still owned by the federal government. Thirty-six were occupied by the judiciary and other federal tenants, 3 were vacant and 1 was under renovation. Excluding the building closed for renovations, about 14% of the total space was vacant, compared with the 4.8% vacant space average in all federally-owned buildings in 2012. Case studies of old courthouses revealed that high costs and complexity of renovations often lead to underutilized space at many locations, while parking limitations at a California courthouse limited its appeal to new federal tenants. Space needs within the judiciary have also changed, leading often to suboptimal use. For example, the report questions the need for 17,000 SF of library space in a Richmond courthouse when online legal research is increasingly common and new courthouse designs allocate about 9,200 SF. Full building and partial vacancies contribute to net-operating-income losses for many old courthouses and deplete the Federal Buildings Fund, which the GSA uses to maintain and improve its whole real estate portfolio.

The GSA sold 14 and exchanged 3 old courthouses, realizing about $20 million from sales plus land for new courthouses. Future uses for the disposed buildings included affordable housing, state and local government offices, a juvenile justice center and a hotel. Most buildings with historical significance were conveyed with requirements that historic features be preserved during re-use. Case studies again were revealing, as in the decade-long efforts to dispose of an old Kansas City courthouse. Opened in 1939 and vacated in 1998, the building’s historical significance led the GSA to retain ownership but no practical re-use was identified. Not until 2008 was the City of Kansas City granted a public building conveyance. Screening of excess real property for use by organizations for the homeless, as required by McKinney-Vento Homeless Assistance Act, can also be protracted and complex, and the GAO did not find any old courthouses re-purposed to benefit homeless people.

In light of the costs and complexities of courthouse reuse and disposal, the GAO report concludes that comprehensive planning is essential to achieve more efficient use of government resources. The GSA is not currently required by law to provide plans for old courthouses when submitting new courthouse proposals to Congress, but the GAO contends that Congress and other stakeholders need to know more about the potential fate of old courthouse space to make informed decisions about capital planning. The GAO report specifically recommends that the GSA and the judiciary include specific plans in proposals for new courthouses for reuse or disposal, including needed renovations, related costs and anticipated issues that could cause difficulties and delays.  The judiciary and the GSA concurred with the recommendation in letters included with the report. In his response, GSA Administrator Dan Tangherlini supports the effort to improve transparency in planning, saying the GAO recommendation “will enable congressional decision makers to more accurately assess the viability of GSA’s proposals and the full costs of those proposals to the American taxpayers.”

After a cliffhanger Senate vote on July 31, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) has its first permanent director in 7 years. B. Todd Jones, acting director since 2011, now officially heads a law enforcement organization with a mission “to protect communities from violent criminals, criminal organizations, the illegal use and trafficking of firearms, the illegal use and storage of explosives, acts of arson and bombings, acts of terrorism, and the illegal diversion of alcohol and tobacco products.” A relatively small agency within the Justice Department, with a FY2012 budget of $1.152 billion, the ATF has about 4,800 employees not including the highly-trained, 4-footed members of its canine explosive detection units. Its bomb-proof, LEED-Silver headquarters covers 5 acres and 422,000 square feet on New York Avenue in Northeast D.C., and other ATF facilities include 25 field offices, forensic laboratories in Maryland, Georgia, and California, and the National Center for Explosives Training and Research in Front Royal, Virginia.

The bureau’s storied history can be traced back to the 1886 formation of the Revenue Laboratory, within the Treasury Department’s Bureau of Internal Revenue. During prohibition, revenuers from the ATF’s legacy agencies hunted down bootleggers smuggling alcohol into the U.S. from Canada and Europe. Special Agent Eliot Ness and his team of “Untouchables” crippled Chicago’s organized crime syndicate, ultimately leading to Al Capone’s indictment for 5,000 prohibition violations and 22 counts of tax evasion. The ATF’s forerunners shuttled back and forth between the Treasury and Justice departments before and after the repeal of the Volstead Act ended prohibition. By 1942, the Alcohol Tax Unit (ATU) of the Treasury had the added responsibility of federal firearms enforcement, and, in the early 1950s, the ATU began enforcing federal tobacco laws as well. In 1968, the organization first became known as the ATF, acronym for Alcohol, Tobacco and Firearms Division of the IRS, and, in 1972, the ATF became the Bureau of Alcohol, Tobacco and Firearms with a primary mission of preventing violent crime through enforcement of federal firearms and explosives laws. The Homeland Security Act of 2002 shifted the ATF again to the Department of Justice and changed its official name to the Bureau of Alcohol, Tobacco, Firearms and Explosives.

The Patriot Act also impacted the ATF when Congressman Jim Sensenbrenner (R-WI) inserted a requirement for Senate confirmation of the ATF director in the 2006 reauthorization bill. Bitter fights over gun control have been blamed for delays in appointing a permanent director ever since. Previous acting directors appointed by presidents Bush and Obama were not granted Senate hearings, and Todd Jones, the top federal prosecutor in Minneapolis, Minnesota, was called to fill in after the Operation Fast and Furious gun trafficking scandal forced the previous acting director to resign. In remarks at his swearing-in ceremony, Jones acknowledged the troubled state of the agency on his arrival in 2011. He said, “This ship had run aground and was taking on water.” Jones is credited with stabilizing the bureau and ably managing ATF responses to mass shootings in Aurora, Colorado, and Newtown, Connecticut, and the Boston Marathon bombing. When the National Rifle Association decided not to take a position on Jones, bipartisan support became possible, and Jones was confirmed by a vote of 53 to 42.

In FY2012, then-acting director Jones led an organization that seized $6.4 million in criminal contraband, initiated criminal investigations in 23,199 firearms cases and conducted compliance inspections 5,390 federal explosives licensees. Director Jones is expected to continue pursuing violent crime prevention and other agency goals outlined in the ATF Strategic Plan for 2010-2016, with a particular focus on explosives detection in the wake of the catastrophic West Texas, fertilizer plant explosion last April.

The director’s top priority in the coming months, however, may be organizational management. At his swearing-in, Jones praised his colleagues for their dedicated efforts but also called for additional training in “the fundamentals” and improved collaboration with local, state and federal partners. In an era of budget squeezes and sequesters, Jones expressed particular concern about the risks of attrition leading to the loss of years of knowledge and experience. Said Jones, “Our ability to contribute to enhancing public safety in communities across the country depends on our ability to ‘get healthy’ as an organization.”