Slowdown in federal real estate sales



Lew Sichelman

You’re not the only one working from home: so are thousands of government employees. And as a result, the needs of Uncle Sam’s office have changed dramatically.

Now, the Government Accountability Office, the investigative arm of Congress, has tapped the government property manager to help many agencies consolidate their office needs. This could save millions of dollars – and perhaps provide the private sector with an opportunity to revitalize vacated spaces.

Use your imagination to think about what a savvy developer might do with a 17-acre former government site in Menlo Park, California. It has 17 buildings that could be converted into apartments or condominiums. Or consider a 14-acre former missile site in Gaithersburg, Maryland, where there is high demand for housing of all types and zoning is flexible.

Key information not shared

Some 17 major federal agencies have already made limited changes to their leased and owned office space due to the pandemic and uncertainty about how their employees will work in the future. A majority expect to reduce the number of leases or square footage in their property portfolios, primarily in response to working from home.

The General Services Administration — the independent agency that, among other things, is responsible for federal government office space — has also expanded its space planning and data collection efforts. And 20 of the 24 agencies surveyed by GAO collect similar data themselves.

The majority of agencies believe that the information gathered by the GSA would help them better understand their own future space needs. But the GSA originally had no plans to distribute the data, which the GAO’s latest report called a costly mistake.

“By not planning to share this information more widely,” the GAO report said, “the GSA is missing an opportunity to provide a clear understanding of how the potential cost of collecting this data might be offset by the benefits term, including potential cost savings through reduced future annual rents, maintenance and other operating costs.”

Known as the government’s watchdog, the GAO said the GSA should develop a plan to disseminate what it learns to federal agencies, including those that do not use its real estate services.

Not so fast, developers

The GSA agreed and said it would share “lessons learned” from its pilot programs and data collection activities. But this is your government at work, so no one – especially builders, developers and investors – should expect to get their hands on surplus property anytime soon.

Like most governments, Uncle Sam works slowly. How slowly? Well, the government is woefully behind on another effort to reduce the federal footprint: a pilot program passed by Congress in December 2016 to expedite the sale of unnecessary and underutilized federal real estate.

It has now been six years since Congress passed the Federal Assets Sale and Transfer Act (FASTA) to create the Public Buildings Reform Board (PBRB). It took time to get the council up and running; then the pandemic hit, then two of the five board members resigned. President Joe Biden nominated Jeffrey Gural to chair the panel in July, but he has yet to be confirmed.

The disposal of federally owned real property has always been a challenge. Indeed, the process has been on the GAO’s high-risk list for nearly two decades. The 2016 law was supposed to change that, but so far it hasn’t worked as expected.

“It is likely that the FASTA process will not meet expectations or provide insight into ways the federal government can more effectively reduce the federal real estate portfolio,” the GAO said in a report at the end of the year. ‘last year.

Staffing issues Shortfall effort

It wasn’t until December 2019, three years after the council was established, that it finally identified 11 “high-value” properties for sale in what was expected to be a three-step process. In January, only one sale had actually been concluded. But now 10, including the two mentioned above, have changed hands at auction.

The GSA does not reveal the names of the buyers or what they paid. But according to news reports, the biggest bid for the former Veterans Medical Center in Denver was $41 million. In Sacramento, the city paid $12.3 million for 80 unused acres at a Job Corps Center to build housing for those currently homeless.

Meanwhile, the PBRB went ahead with the next round of offers last December, which included 15 properties. But the second phase was shot down by the Office of Management and Budget, which didn’t like the board’s methodology. The OMB gave the board 30 days to respond. But since the PBRB doesn’t have a quorum, it couldn’t – effectively canceling the second round, at least for now.

The first round was expected to generate $500 million to $700 million in revenue that would be reinvested into the program to move it forward. The second round was expected to raise up to $2.5 billion, which the council said saved taxpayers $275 million in the long run.

By law, meanwhile, the third and final round cannot take place until at least three years after the second round, thus pushing it back until 2025 at the earliest.

Lew Sichelman has been covering real estate for over 50 years. He is a regular contributor to numerous shelter magazines and housing and housing finance industry publications. Readers can contact him at [email protected]

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