Commercial real estate professionals are watching for signs of a shift in the location of federal offices in the wake of new rules allowing the government to use real estate outside of downtowns and in suburbs.
An executive order signed by President Donald Trump cleared regulations that had required federal agencies to prioritize central business districts and historic properties when selecting locations for facilities. The previous guidelines, signed by Presidents Jimmy Carter in 1978 and Bill Clinton in 1996, "unnecessarily restricted where federal agencies could site their facilities," the White House said.
The effects of Trump’s executive order will quickly be seen in lease procurement practices, enabling the administration to lease more "peripheral spaces" while still reducing its inventory of federally owned property, said Gordon Griffin, an attorney with Holland & Knight who focuses on General Services Administration leasing and federal real estate, in a commentary. The General Services Administration, or GSA, manager of the federal government’s civilian real estate, has been tasked with finding ways to save money by streamlining federal agencies' footprints and identifying excess or underused buildings that could be sold or otherwise shed.
Federal real estate executives and brokers said their firms are monitoring agencies to watch for their office demand outside of downtowns, especially as the government shrinks its portfolio and looks to potentially sell office buildings that could lead to new locations. The current administration's order cites an emphasis on cost-effectiveness and whether a location is suitable for the agency to fulfill its mission as motivation for the changes. Some suburban offices could be more likely to provide free parking to tenants.
The prior "executive orders were never designed to be rigid and absolute requirements,” said Norman Dong, a partner at brokerage FD Stonewater and former commissioner of the GSA Public Buildings Service, in a phone interview.
The GSA continues to expand a list of properties from across the country that it’s considering for accelerated disposition as it aims to shrink supply of underutilized buildings that incur hefty maintenance and modernization needs. The latest list includes the U.S. Department of Housing and Urban Development’s headquarters in Washington, D.C.
The GSA and the White House Office of Management and Budget this week announced an initiative to allow the public to submit ideas for ending existing rules and regulations through an online form.
“America thrives when people can challenge burdensome rules that threaten their freedom and livelihood,” GSA Acting Administrator Stephen Ehikian said in a statement. “Overregulation stifles innovation and hurts small businesses.”
Flexibility in site selection
The administration's decision to scrap rules that limited federal space searches to particular areas won't result in wholesale relocations, one commercial real estate executive said.
“The elimination of these EOs will have limited impact on where federal real estate is located in the future,” said Darian LeBlanc, who manages Cushman & Wakefield’s government services group, in a statement to CoStar News.
There have been examples where locating agencies in downtowns helped drive urban economic development, FD Stonewater's Dong said. One is the headquarters constructed in 2008 for the Bureau of Alcohol, Tobacco, Firearms and Explosives that helped revitalize the area north of Massachusetts Avenue known as NoMa in Washington.
Other agencies have selected office sites outside city centers, such as the FBI did for some of its field offices, Dong said.
The new rules emerge as the Trump administration has asked agencies to submit any proposed relocations of bureaus and offices from the greater D.C. area to less costly parts of the country.
Elected officials are already vying to have their districts selected as homes for federal agencies that move their main offices. Ohio’s Republican governor and several Texas lawmakers have lobbied to become home to the new headquarters of the National Aeronautics and Space Administration, currently in the nation’s capital.
Others in Congress have introduced measures to push back against the effort to relocate federal agencies.
As for HUD, it is considering a plan to leave its longtime headquarters in the Robert C. Weaver Federal Building near the National Mall in Washington, joining corporate and government tenants across the country looking to ditch their spaces in aging properties and trade up to newer options.
"HUD’s focus is on creating a workplace that reflects the values of efficiency, accountability, and purpose,” HUD Secretary Scott Turner said in a statement. “We’re committed to rightsizing government operations and ensuring our facilities support a culture of optimal performance and exceptional service as we collaborate with our partners at GSA to deliver results for the American people.”
While the timeline and ultimate destination for a HUD relocation are still under evaluation, officials confirmed the metropolitan region of the nation’s capital is a priority for where the federal housing department would be located.