4 takeaways about DC federal office leasing in 2020

The General Services Administration (GSA) continues to view Washington, DC as its gold standard for their current and future offices.

Between the proximity to both the legislative and executive branches as well as the abundance of neighboring agencies and supporting contractors, the General Services Administration (GSA) continues to view Washington, DC as its gold standard for their current and future offices. Despite this, factors ranging from political to economic prevent continued symbiosis between government office leasing and the District, a metropolis historically dominated by the public sector and the driving force behind its economy. To put it in perspective: GSA owns 184 million square feet of office space nationwide. Of that, 30% is within the DC metropolitan region. Given the stakes, here are a few insights about what is expected from the Metro DC federal landscape in 2020:

1. GSA’s leverage is diminishing

DC rebounded from the 2008 downturn with a highly educated workforce compared to the national average. Technology, life sciences, and cybersecurity companies took notice and began pursuing Metro DC space that previously would have been snagged by a federal tenant.

“Many real estate investors with government tenancy have pivoted strategies to target potential higher returns from private-sector tenancy. This trend has played out across the country, even in markets that traditionally favor federal government tenancy,” said Arthur Russell, managing director of JLL’s Government Investor Services (GIS) team. With the demand comes owners offering their supply, leaving many federal agencies scrambling to find office space in a region that was their playground.

2. DC’s core is taking the biggest hit

Capitol Hill, the CBD and East End were previously the hub of GSA in DC. According to JLL Research, 61% of GSA’s leased DC footprint was within this urban core in 2000. That number is now the inverse: only 37% of GSA square footage is still within these three submarkets and the other 63% now occupies emerging markets such as NoMA, Ballpark and Southwest.

Since 2015 alone, over 2.3 million square feet of federal agencies have relocated from core to emerging markets. Why? GSA, known for its thrifty preference for Class B and C office supply, was shut out when a substantial wave of new development downtown removed more than 4 million square feet of Class B and C inventory for them to occupy.

3. The federal government may be priced out of the market it created soon

Between 2021 and 2025, 40% of GSA’s downtown portfolio is set to expire. As demand and construction prices rise, owners and developers are questioning the benefit of federal tenancy over their private-sector counterpart. The $50-per-square-foot prospectus cap forces their hand when downtown rental rates hover between $52-65 per square foot for Class A or B office in DC’s core. Without a reevaluation of this price point, GSA is strained in its office space options when the private sector is willing to pay a higher rate.

4. Competing for talent has its cost

Workplace trends also suggest a shift toward employee-focused cultures, opting for improved build-outs to remain competitive in such a strong economy. GSA is following suit. “The government is taking cues from the private sector... However, adherence to strict spending limits poses a substantial challenge given the rise in construction costs and technology taking a larger share of the build-out budget,” said Brian Calis, vice president on JLL’s GIS team.

The result may mean moves out of DC. Suburban Maryland and Northern Virginia are seeing significant shifts in their federal tenancy. While GSA is beginning to signal their interest beyond DC’s city limits, a complete recalibration of their location strategy is still unlikely given the desire to be near key government and political players.

For more insights on the Washington, DC federal leasing market, read more on JLL’s Federal Perspective at

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